Inventions are Worth More if They are Patented

Professor Arora and colleagues studied what they called the patent premium, finding that firms on average can expect to earn 50% more on an invention if it is patented rather than unpatented. They also found that the more valuable a patent, the more R&D that takes place: a 10% increase in this patent premium leads to a 6% increase in R&D expenditure by the patent holder (Arora etal, R&D and the Patent Premium (2003)).

Patents attract investment

Patents can be the key condition for startup firms to get access to funding from investors such as venture capitalists. Once a start-up reaches a certain stage of development, the fact that it has turned its R&D into a patented asset signals good management and demonstrates that the firm has defined and carved out a market niche (Lemley, Reconceiving Patents in the Age of Venture Capitalism (2000); Kamiyara et al, Valuation and Exploitation of Intellectual Property (2006)).

[This is an excerpt from the publication released by WIPO called The Role of IP in Promoting Economic Growth through Innovation. To read the complete publication, please visit the Download menu to get a copy]