An Estimate of Firms Patent Rents from Firm's Market Value

James E. Bessen

Boston University School of Law Working Paper 06-14

Abstract


The value of patent rents is an important quantity for policy analysis. However, estimates in
the literature based on patent renewals might be understated. Market value regressions could provide
validation, but they have not had clear theoretical foundations for estimating patent rents. I develop a
simple model to make upper bound estimates of patent rents using regressions on Tobin’s Q. I test this
on a sample of US firms and find it robust to a variety of considerations. My estimates correspond well
with estimates based on patentee behavior outside the pharmaceutical industry, but renewal estimates
might be understated for pharmaceuticals.



Keywords: Technology, patents, innovation, patent value, firm value

JEL Classificaitons: 034, 038, K1

Working Paper Series



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James Bessen Contact Information:

jbessen@researchoninnovation.org

Boston University School of Law
765 Commonwealth Ave
Boston, MA 02215
USA
(617) 353-5817

SSRN Site:

http://www.ssrn.com/abstract_id=912661

 

Suggested Citation :

Bessen, James E., "Estimates of Firms' Patent Rents from Firm Market Value" (June 28, 2006, revised July 26, 2007). Boston Univerity School of Law Working Paper No. 06-14. Available at SSRN (see above).


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