Private value of patent right and patent infringement: An empirical study based on patent renewal data of China

It is common to see patentees coexist with infringers in developing countries, which leads to a split of patent value between patentees and infringers. This paper extends traditional model for estimation of patent value. We classify patentees by technology level: Patentees with low technology level are motivated to imitate patentees with high technology level. This leads to an early lapse of patent right by patentees with both high and low technology level. With this model, we estimate the value of invention patents in China. Although patent value of Chinese firms is lower than that of foreign firms, the differences are not as large. This is mainly because of the existence of potential patent value. This value is dropped, since the motivation of imitating foreign patents leads to the lapse of their own patents. Technology contained in the patent would thus not be further developed. The infringement behavior is more likely to occur in technology fields with less technology gap between Chinese and foreign firms, which may be due to an easier copy of technology. The strengthening of patent protection works, as two patent law amendments in 1993 and 2001 reduces the infringement. Policy implications are made at the end of the study.