Patent citations and licensing value

Abstract

Innovation has become the dominant economic idea of our time and has resulted in a proliferation of innovation-oriented rhetoric, and policies. There is a great need to understand and harness innovation, but it has proven to be as difficult to measure as it is to define. At present, the quest to understand innovation hinges on finding reliable ways to identify and measure it, the most promising of which is the analysis of patent information. Patents have been increasingly used by economists to track inventiveness, the transmission of knowledge, and their economic impact. However, it is evident that the maiority of patents have little or no economic potential, and so merely observing the number of patents provides little insight on innovation. It has become important, therefore, to develop reliable methods for measuring the true economic potential of patents. Of all the solutions proposed, the analysis of patent citations is the most promising. This study examines the relationship between patent citations and the private economic value of patents, and makes both theoretical and empirical contributions.

(cont.) First, the previous literature is reviewed to further extend and clarify the theory of the economic meaning of patent citations. Second, a typology of patent value is proposed to contextualize the relevance of the theory under different appropriation regimes. Finally, this study tests the economic meaning of citations using a new dataset where the licensing value of a group of patents is observed directly. The findings confirm a consistent relationship between patent citations and two different measures of patent value.