Scientific Monographs, Bank of Finland
No E:41/2009:
Empirical studies on the private value of Finnish patents
Charlotta Grönqvist
Abstract: It is a commonly accepted fact that innovation is
important for economic growth and that a well-designed patent system
increases research and development investments. Patents are unfortunately a
second best solution. While the benefits of the patent system are increased
incentives to innovation, diffusion of new knowledge, and easier
commercialization of patented innovations; the drawback of the patent
system is the monopolies it creates. Therefore, the fundamental question
that has interested researchers is: do the benefits of the patent system
outweigh the costs? This thesis contributes to the literature that
quantifies the benefits of the patent protection to the assignee after the
patent is granted, ie the private value of patents. In three of the four
essays here, I estimate how different patent and assignee characteristics
affect the private value of Finnish patents. The private value distribution
of patents is calculated using patent renewal rates and fees and advanced
econometric techniques. In the fourth essay I test how a legal change in
the statutory length of patents has changed the private value of patents in
Finland. To do this, I use nonparametric techniques. The last essay
contributes to the discussion on optimal patent design. I present two
overall policy recommendations based on the essay findings. First, I find
that the distribution of the private value of patents depends not only on
patent characteristics but also on patent assignee characteristics. This
derives from the fact that it takes time and money to learn the private
value of a patent. Also, there seem to be financial imperfections that,
especially for smaller firms, restrict the internalization of patent
revenues. If patents are seen as a good incentive mechanism for innovation,
the policy implication is that commercialisation of patented innovations
should be supported. Second, I find, using the patent law change as a
natural experiment, that the statutory patent length of 20 years is too
long. The optimal patent length is shorter than 18 years in Finland.
Keywords: patent; private value; renewal rates; renewal fees; Finland; (follow links to similar papers)
JEL-Codes: C01; O34; (follow links to similar papers)
167 pages, March 30, 2009
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