A multiple regression model for patent appraisal

Publication Date01 Dec 2006
AuthorJiang‐Liang Hou,Hsiu‐Yan Lin
SubjectEconomics,Information & knowledge management,Management science & operations
A multiple regression model
for patent appraisal
Jiang-Liang Hou and Hsiu-Yan Lin
Department of Industrial Engineering and Engineering Management,
National Tsing Hua University, Taiwan, Republic of China
Purpose – Concerning the general patent trading mechanism, this paper proposes a systematic
patent appraisal model to provide patent transferors and transferees a reasonable price suggestion of
the target patent.
Design/methodology/approach – Based on the appraisal factors (including the patent transferor,
patent transferee, patent features, and patent trading specifications) and regression model, a patent
trading system is developed with an automatic patent appraisal function.
Findings Based on the case study, it is found that the system performance is better if the
non-critical factors can be identified and dropped out from the appraisal model.
Practical implications The proposed mod el and platform can enhance p atent trading
performance and, therefore, the enterprise R&D tasks can be accomplished more efficiently.
Originality/value – This study proposes quantitative models of patent appraisal factors and a
multiple regression model for patent appraisal to present an automatic patent price determination
Keywords Patents, Trade administration, Multipleregression analysis
Paper type Research paper
1. Research background
In the coming knowledge-based economy, management and applications of intellectual
properties (e.g. patents and technical know-how) have been an important issue for
modern enterprises to keep their core competency (Gonza
´lez-Alvarez and
´n, 2005; Choy et al., 2006). The application and authorization of patent
rights can assist enterprises keep unique competitiveness in the market under the
protection of law and avoid the copying and plagiarism of other companies (Danc hev,
2006). In addition, patent holders can create benefits for the enterprise via patent
related business (e.g. sales of patented products and authorization of patents). On the
other hand, patent demanders can lower R&D cost and avoid the R&D risk by
introducing the existing patents or technologies (Lemos and Porto, 1998; Goh, 2006).
Under such situation, enterprise R&D efficiency can be increased and time to market
can be significantly reduced (Huang and Lin, 2006). Therefore, patent appraisal has
become one of the important issues for enterprises.
Previously, patent bargaining and trading was a complex procedure that relies
heavily on domain experts. Patent demanders have to first gather the relevant data of
patents through online patent offices (e.g. WIPO and USPTO) for brief introduc tions of
patents. After acquiring the data sheet of the target patent, the patent demander can
communicate with the patent transferor and sign the non-disclosure agreement to fully
understand details of the target patent. Then both parties further negotiate the license
fee and authorization mode via a complex procedure. Thus, the existing patent trading
The current issue and full text archive of this journal is available at
Industrial Management & Data
Vol. 106 No. 9, 2006
pp. 1304-1332
qEmerald Group Publishing Limited
DOI 10.1108/02635570610712591
mode including patent search, authorization mode negotiation and price bargaining is
time-consuming and labor-intensive. The motivation and aim of this paper can be
summarized in the following two points.
1.1 The existing patent trading process is time-consuming and labor-intensive
Owing to the increasing patents and lack of an open patent market, it is necessary to
establish a channel for patent providers and buyers to lower the search and tran saction
costs for patent trading. Therefore, this research develops a patent trading platform
with the functions of patent transfer, searching and demand matching in order to lower
the cost for patent search and speed up patent trading.
1.2 The existing patent price negotiation process is complicated with different and
conflicting appraisal standards
At present, the business and academy circles develop several patent appraisal
methodologies including traditional ones (e.g. the cost-oriented, revenue-oriented and
market-oriented methodologies) and the emerging option-oriented methodology.
However, all the above appraisal methodologies have their limitations and
disadvantages. Owing to uniqueness of patents, it is not easy to find a comparable
price benchmark in the market for appraisal of the target patent. Therefore, a
standardized and applicable appraisal model is required to replace the current complex
negotiating process between the patent providers and buyers.
In regard to the general patent trading mechanism, this paper proposes four patent
appraisal factors including “patent transferor”, “patent transferee”, “patent features”
and “patent trading specifications” to establish a systematic patent appraisal model.
Based on the model, a patent trading system can be developed with an automatic
patent appraisal function. The proposed model can provide patent transferors and
transferees a reasonable price suggestion of the target patent. As a result, the
negotiation procedure for patent trading can be simplified and efficiency and
successful rate of patent licensing and trading can be increased.
2. Literature review
In the patent/technology appraisal research field, the related studies focus on
patent/technology appraisal factors, patent/technology appraisal methods and
patent/technology trading.
2.1 Patent/technology appraisal factors
In patent/technology appraisal, the appraisal factors should be figured out first to
avoid overestimated or underestimated patent prices resulting from improper selection
of appraisal factors. Davidson and McFetridge (1985) discuss the influences of three
major factors including technology features, technology transferor profile and business
status of patent trading parties on the technology value during technology transfer. On
the other hand, Liu et al. (2001) indicate that technology evaluation must consider three
main factors including knowledge and technology, technology development policy and
legal groundwork, and business env ironment. Attributes such as techno logy
innovation ability, technology specialty and classification, product management,
technology competitiveness, technology support, technology risks and property
ownership are included in these factors (Raymond and Croteau, 2006).
A multiple
regression model

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