The Economic Valuation of Patents

The Economic Valuation of Patents

Methods and Applications

New Horizons in Intellectual Property series

Edited by Federico Munari and Raffaele Oriani

The Economic Valuation of Patents provides an original and essential analysis of patent valuation, presenting the main methodologies to value patents in different contexts.

Chapter 9: Patent Licensing Contracts

Massimiliano Granieri, Maria Isabella Leone and Raffaele Oriani

Subjects: economics and finance, economics of innovation, intellectual property, innovation and technology, economics of innovation, intellectual property


Massimiliano Granieri, Maria Isabella Leone, Raffaele Oriani 9.1 INTRODUCTION The aim of this chapter is to discuss the application of patent valuation methods within the context of license agreements. Licenses are specific authorizations for the use of a given intellectual property (IP) right (in our case one or more patents) issued by one party (the licensor) to another party (the licensee) in exchange of contractual payments. The negotiation and the definition of the contractual terms of a patent license agreement are, as we will discuss in this chapter, complex tasks. The application of one or more financial valuation methods may facilitate this process and help the parties to reach mutually satisfactory conditions. In order to better understand the specificities of the licensing context for valuation purposes, the legal and economic structure of patent license agreements will be initially described. In doing that, we will highlight the asymmetry in the positions of the licensor and the licensee, which is a crucial aspect to understand the objectives and the financial flows for the different parties entering the negotiation of the agreement. Accordingly, we will explain that in the application of the financial valuation methods, we have to account not only for the total value created by the license, but also for how this total value will be distributed between the licensor and the licensee. This chapter is organized as follows. In the next section we will introduce the basic terms of the legal and economic structure of patent license agreements, while in...

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