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 13: Stock Market Valuation of Patent Portfolios

Serena Morricone and Raffaele Oriani

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


Serena Morricone, Raffaele Oriani 13.1 INTRODUCTION As extensively discussed in this book, patents may have a significant impact on a firm’s economic performance. We would then expect that they represent an important share of a firm value (see Chapter 5). Therefore, if a firm is going public through an Initial Public Offer (IPO) or is already publicly traded on a stock market, the value of its patents should be reflected to some extent in stock prices. However, this book has also discussed the difficulties of assessing patent values. Given the uncertainty on patent returns and the specificity and idiosyncrasy of each patent, a proper valuation could require a set of private information not available to external investors. The existence of information asymmetries between insiders (managers) and outsiders (financial investors) could bring the latter to not adequately evaluate a firm’s patent portfolio. Several empirical studies taking different methodological approaches have tried to assess whether and how stock market investors evaluate a firm’s patent portfolio. Some of these studies have looked in particular at the relationship between patent indicators and market values (see Chapters 3 and 7). Other studies in the accounting literature, instead, have tried to assess whether the information disclosed on patents usefully complements the data obtained from financial reports for stock market investors. The question of how the stock markets evaluate firms’ patent portfolios is important for several reasons. First, a better understanding of whether and how stock prices reflect patent value can provide interesting insights for the application...

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