DP9264 The Economic Value of Patent Portfolios

Author(s): Alfonso Gambardella, Dietmar Harhoff, Bart Verspagen
Publication Date: January 2013
Keyword(s): intellectual property rights, inventors, patents, technical change
JEL(s): L20, O31, O33, O34
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9264

Patent holders may choose to protect innovations with single patents or to develop portfolios of multiple, related inventions. We propose a simple decision-making model in which patent-holders may allocate resources to either expanding the number of related patents or investing in higher value of patents in the portfolio. We estimate the derived value equation using portfolio value data from an inventor survey. We find that investments in individual inventions exhibit diminishing returns, and that much of the value of a portfolio depends on adding new inventions. These effects are less pronounced in high-techology industries, when the inventions rely on external information, and when the inventor holds a doctorate. We also find higher returns to an increase of the number of inventions when firms perceive patent protection to be strong. Thus, a higher number of inventions in a portfolio may reflect both genuine creation of value or stronger appropriability via patents.