Intellectual Property Research: Encouraging Debate and Informing Decisions

Transcription

1 Oxford Intellectual Property Research Centre St. Peter s College Intellectual Property Research: Encouraging Debate and Informing Decisions Economics and Management of Intellectual Property Dr. Robert Pitkethly

2 Oxford Intellectual Property Research Centre St. Peter s College Joint Ventures Organizational Design Standards Motivation Theory Intellectual Property Economic & Strategic Theories of the Firm Appropriation Business & Technology Strategy Resources MANAGEMENT Accounting Licensing Innovation & R&D Management Economic Theory of IPRs ECONOMICS Economic Effects of IPRs Game Theory IPR Valuation Financial Theory FINANCE Legal Theory of Property Legal History IP Law IPR & Licensing Decision Making LAW IPR & Licensing Administration

3 Oxford Intellectual Property Research Centre St. Peter s College IP Related Economics and Management Research Theory Policy Practice Public Private Why What How (& when, where) (IP Strategy)

4 IP Related Economics and Management Research Theory Economic Theory of Patent Systems scholars must not lack the courage to admit freely that there are many questions to which definite answers are not possible, or not yet possible. They need not be ashamed of coming forth with a frank declaration of ignorance. (Fritz Machlup, 1958) little, if anything, has been said for or against the patent system in the twentieth century that was not said equally well in the nineteenth (Machlup & Penrose, 1950) History of Patent Systems No Patent System (Schiff 1971) Alternative Systems (Polanyi 1944) Developing Patent Systems (Prager 1944 / MacLeod 1988 Machlup & Penrose,1950) There is much to learn from the often neglected history of IP systems

5 IP Related Economics and Management Research Public Policy Japan No IPRs to Paris Convention Membership in under 50 years ( ) Paris Convention Membership linked to revision of earlier trade treaties Development of Patent System has reflected Japan s : Wish to develop and the state of development of Japanese industry Need to placate technologically stronger trading partners Gradual shift from diffusion (Ordover 1991) to protection of IP as technology leadership by Japan developed Change recognised in 1997 From now on Japan too is entering the pro-patent era Mr H. Arai former JPO Commissioner History may contains many useful examples of the development of IP systems

6 IP Related Economics and Management Research Public Policy USA US Senate Committee on Commerce, Science and Transportation 1988 Senator Packwood : I am not a patent attorney. I have never handled a patent case in my life, and am relatively unfamiliar with how the system may work in Germany, Japan, or Borneo or any place else. But as I read through the three statements of Commissioner Quigg, Ms. Smith and Mr. Massey, throughout it all, in one way or another, you seem to be saying that the Japanese system is more akin on balance to the European System and that ours is kind of the odd man out. Do I read you correctly? Mr. Quigg (USPTO Commissioner) : That s correct, sir. Much IP research is US based but non-us based research also needs study

7 IP Related Economics and Management Research Public Policy Extensive but primarily economic Research on : By (inter alia) Patent Scope (Klemperer, 1990)(Lerner,1994) Patent Examination (Harhoff, 2003), Re-examinations/Oppositions (Kitti,1978)(Harhoff,2003)(Hall,2003) Patent Litigation (Meurer, 1989)(Lanjouw, 2001) Software / Business Method Patents (Merges, 1999) Patents as Economic Indicators (Basberg, 1987) (et al. see valuation later) Supported by an active Law & Economics of IP community in the US and increasingly in Europe by groups such as EPIP (

8 IP Related Economics and Management Research Private Policy IP Strategy Writing specifically linked to IPRs theoretical role in Business Strategy (& excluding legal tactics) : Links between IPRs and Strategy (Teece, 1986) Complementary Assets Appropriability Dominant Designs IP strategy (Afuah, 1998) Block Run Team-Up

9 IP Related Economics and Management Research Practice Primarily Descriptive not Prescriptive Writing on : General means of Appropriation (Levin & Klevorick et al.,1987) General use of the Patent/IP system (Boehm & Silberston, 1967 Licensing practice (Hall & Ziedonis, 2001) Cumulative Research (Scotchmer, 1991) Patent Thickets (Shapiro, 2001) IP Management/Strategy in Practice (Rahn, 1994) (Pitkethly,2001) (overlaps with private IP policy) (Reitzig, 2004) This mostly relates to how industry does rather than how it should manage IP.

10 Oxford Intellectual Property Research Centre St. Peter s College VALUATION

11 What are Valuations used for? Internal Management Internal IP Management Decisions First Filing, Foreign Filing, Examination, Renewal External Transactions Licensing / Purchase / Sale / Joint Ventures Raising Finance Valuing IP for use as security for debt Third party valuations Investment decisions / due diligence Acquiring or Licensing in IP Academic Studies / Informing Policy & Theory Calculation or Measurement preferred by Patentee (Large old or acquired IP portfolios may be an exception) Calculation or Estimation preferred by 3rd Parties

12 What is Patent Valuation? What Patent Valuation means is often unclear - one must distinguish : a) Collective Value of Patents b) Individual Value of a Patent c) The Value of the Business without the Patent d) The Value of the Business with the Patent e) = (c) - d)) = The Value of the Patent per se f) Measurement / Ex-post (analysis - less difficult) g) Calculation /Ex Ante (prediction - difficult: using cashflows) h) Estimation / Ex-ante (prediction - more difficult: using patent data)

13 Patent Data The Authors & Purpose of Patent Data used for valuation must be remembered : A) The Patent Attorney and Patentee writing and owning the patent Wording of Specification and Claims, Citations, Foreign Filings/Designations, Prosecution history, Renewal fees, etc. B) The Patent Office and Examiners examining / issuing the patent Citations, may also influence Claims and Prosecution history C) Third parties in the examination/opposition process Oppositions filed, Observations submitted, Secondary Citations, etc. D) Academics cleaning and combining data to produce new datasets

14 Sources of Values To measure how much a patent is worth: we can study : Patentees Opinions Asking Patentees what price they would accept for their patent eg (Harhoff, D., F. M. Scherer, et al. 2003) Patentees Decisions Inferring value from Renewal Fee payment decisions eg (Schankerman and Pakes 1986) Financial Data Company Profits / Stock Market Values / Residual Values eg (Greenhalgh and Longland 2005)(Hall, Jaffe et al., 2000)(Ramb and Reitzig, 2004) Most measures are proxy-measures

15 Economists and Analysis of Patent Data 1st Generation Patent Counts & R&D studies Quantity (Griliches, 1981) 2nd Generation (electronic data) Patent Quality and Value : Citations and Renewals (Trajtenberg, 1990) (Hall, Jaffe et al., 2000) (Schankerman and Pakes 1986) Quality 3rd Generation Patent Quality, Value : Variety of measures Variety of bibliometric data (Harhoff, D., F. M. Scherer, et al. 2003) (Harhoff and Reitzig, 2004) These involve Measurement & Estimation not Calculation of Value

16 Patent Values : Findings Patent Value Distributions are highly skew eg Harhoff, D., F. M. Scherer, et al. (1997) (there are few very valuable and many not very valuable patents) Patent Citations give a better view of patent quality and value eg (Hall, Jaffe et al., 2000) Multiple Bibliographic measures give an even better view eg (Lanjouw, J. O. and M. Schankerman (2004), (Gambardella, A., D. Harhoff, et al. (2005)) BUT :Current Economic Research does not take a patentee s view of valuation Management of IPRs by their creators needs Ex-ante Calculation - not Measurement or Estimation - of value

17 100 The importance of the option value changes over a patent s life % of Value Option Value Conventional DCF Value 0 Time Pitkethly, R.H. "The Valuation of Patents : A review of patent valuation methods with consideration of option based methods and the potential for further research", WP 05/99, OIPRC Electronic Journal of Intellectual Property Rights, <

18 Conclusions

19 Conclusions Economic Analysis of Patent data is useful for studying : Economics of R&D and Innovation IP theory and public policy Distributions of patent values Patent specifications to estimate patent values Independent patent portfolio analysis by 3rd parties Assessing technology trends and key inventors Stock picking Estimating patent values But.

20 Conclusions Drivers of Economics related (and other) IP research need consideration. Economic Analysis of IP tends to avoid : Qualitative studies of key IP decision making processes Initial Filing, Foreign Filing, Renewal, Litigation Issues depending on managers perceptions of IPRs Deterrent value of IP vis a vis infringers Attractive value of IP vis a vis investors IP Awareness & effectiveness of the IP system Study of IP management processes Relating to how to manage IPRs and IP Portfolios IP Research encourages debate but to inform decisions about IP Management these gaps need filling Inter-disciplinary and co-operative reesarch is the best way to fill the gap.

21 Bibliography Afuah, A Innovation Management. Oxford: Oxford University Press. Basberg, B. L Patents and the measurement of technological change: A survey of the literature. Research Policy, 16: Besen, S. and Raskind, L.J. (1991) An Introduction to the Law and Economics of Intellectual Property. Journal of Economic Perspectives 5(1), 327. Boehm, K., & Silberston, A The British Patent System I: Administration. Cambridge: Cambridge University Press. Gambardella, A., D. Harhoff, et al. (2005). The Value of Patents. The Measurement and Analysis of Innovation and Productivity Growth, Groningen. Greenhalgh, C. and M. Longland (2005). "Running to Stand Still? The Value of R&D, Patents and Trade Marks in Innovating Manufacturing Firms." International Journal of the Economics of Business 12(3): Griliches, Z. (1981). "Market Value, R&D, and patents." Economic Letters 7(2): Griliches, Z. (1990). "Patent Statistics as Economic indicators: A Survey." 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