The Importance of Patent Scope: An Empirical Analysis
Volume: Volume 25, No. 2
Issue: Summer 1994
Pages: pp. 319-333
Authors: Joshua Lerner
Title: The Importance of Patent Scope: An Empirical Analysis
Abstract: This article examines the impact of patent scope on firm value. I develop a proxy for patent scope based on the International Patent Classification scheme. Using a sample of 535 financing rounds at 173 privately held venture-backed biotechnology firms. I show that the breadth of patent protection significantly affects valuations. A one standard deviation increase in average patent scope is associated with a 21% increase in the firm's value. Broad patents are more valuable when substitutes in the same product class are plentiful, a finding consistent with theoretical suggestions.
JEL Classification:
Intellectual Property Rights: National and International Issues Patents, Copyrights (O340)
Technological Change: Government Policy (O380)
Technological Change; Innovation; Research and Development: General (6210)
Technological Change and Innovation (6211)
Research and Development (6212)