Patent Valuation and Real Options

Article Information

Journal: Business and Economics Research Journal

Title of Article: Patent Değerlemesi ve Reel Opsiyonlar

[Patent Valuation and Real Options]

Author(s): Deger Alper

Volume: 2

Number: 1

Year: 2011

Page: 153 – 172

ISSN: 1309-2448


As the knowledge economics grows rapidly, businesses increasingly invest intellectual property and the value of intellectual property; patent, trademark, copyright etc., more emphasized in business nowadays. Thus, the valuation of intellectual property, specifically patents, has been one of the most difficult investment problems both for practitioners and academics. Traditional valuation methods fail to account for the unique characteristics of patents; uncertainty and management flexibility. Patents are option-like assets that give the owner a bundle of options; to commercialize the products, to file foreign application, to license the innovation etc. Real options represent the application of options methodology to strategic business decisions, and real option method provides a richer framework to analyse the issues that confront the valuation of patent. This paper uses real option model as a framework to correctly evaluate patent and contains real option model application to patent valuation.

Keywords: Patent valuation, Intellectual property, Real options

JEL Classification: G13, O34