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Valuing patents on cost-reducing technology: A case study

Authors
Journal
International Journal of Production Economics
0925-5273
Publisher
Elsevier
Publication Date
Volume
105
Issue
1
Identifiers
DOI: 10.1016/j.ijpe.2006.04.019
Keywords
  • Patents
  • Patent Valuation
  • Discounted Cash Flows
  • Case Study

Abstract

Abstract We present an approach for valuing patents on production process improvements. Specifically, we focus on valuing a patent on cost-reducing process improvements from the viewpoint of the patent holding firm. We do this by considering the relevant cash flows that result from owning the patent. The patent value is determined by (1) licensing fees and royalty income, (2) competitive advantage resulting from the patent, (3) patent maintenance costs. We discuss a case study that presents the difficulties and challenges in finding the relevant information that is needed to estimate the cash flows. We show that valuation of patents on production process improvements cannot be done without good knowledge of technology, markets and competitors.

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