Essays on the evaluation of European patents

My dissertation focuses on measuring the value of patent protection by studying the application and renewal behavior of European patent applicants. I use in my study a comprehensive patent data set collected from the European Patent Office (EPO). In the first chapter, I first run a set of nonparametric tests which reveal that patent characteristics such as the nationality of inventor and the technological classification have significant influence on the application as well as renewal pattern of European patents. I then formulate a deterministic structural patent application model to analyze how different characteristics of patents result in different designation decisions of European patent applicants, and the model implications are similar to the filing patterns found in the nonparametric studies. For example, I find that patent applicants in the “pharmaceutical and health” technology group on average file in more countries for protection than patentees in other technology groups, while the “electronics” patentees file in the fewest countries.; While the above model makes the simplifying assumption of a deterministic depreciation rate of returns to the patent and focuses only on the application behavior of the inventor, the second chapter builds in stochastic learning of the value of patents and combines the study of filing and renewal decisions. The patentee is assumed to receive updated information each period about the value of his patent through a stochastic learning process. I also assume that the patentee is aware of the possibility of the patent being infringed and the subsequent costs in patent litigation. The utilization of both the cross-sectional (multi-country filing) and the time-series (patent renewal) dimensions of European patent data in this model allow one to distinguish more aspects of patent value. The European patents in two industries—pharmaceutical and electronics—are examined. The estimation shows that pharmaceutical patents on average are endowed with higher initial values, and the patent holders seek protection in more countries than the electronics patent holders. However, pharmaceutical patents depreciate faster than electronics patents, and consequently have lower renewal rates and shorter patent lives.