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The Management of Intellectual Property

Edited by Derek Bosworth and Elizabeth Webster

This book brings together innovative contributions on the management of intellectual property (IP) and intellectual property rights by an esteemed and multi-disciplinary group of economists, management scientists, accountants and lawyers.
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Chapter 15: Valuing Patents and Patent Portfolios from a Corporate Perspective: Theoretical Considerations, Applied Needs and Future Challenges

Markus Reitzig


1 Markus Reitzig 1 INTRODUCTION Patent laws (or their legal predecessors) have existed in France since 1790, in the USA since 1791 and in Germany since 1877. Despite their longevity, however, patent valuations are not yet routine procedures for practitioners in the corporate world. Some of the oldest uses for evaluations have been for damage payments arising from litigation, and accordingly, most of the corresponding literature in this field stems from lawyers.2 Since the 1960s patents have also attracted the interest of theoretical3 and empirical economists4 accountants5 and, most recently, management scholars.6 However, the different disciplines have substantially different understandings of what the value of a patent is and how it can be assessed (see Reitzig 2002).7 This finding very much corresponds to the understanding of Pitkethly (1999, p. 3) who says ‘[t]he first questions to be asked of any valuation are: who is doing the valuation?, for whom? and for what purpose?’ This chapter takes a strategic management perspective. Valuation considerations are not bound by any formal legal constraints or accounting standards. Patents are regarded as an asset for a corporation whose value is determined by the value of its underlying technology; its technical, legal and market uncertainty; and the competition scenario as perceived by the patent holder. In this sense, it views patents akin to real options.8 This chapter takes the discussion one step further than Pitkethly (see Chapter 14 in this volume) by asking: 293 294 IP and strategic decision-making • how can we actually...

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