Determinants of patent survival in emerging economies: Evidence from residential patents in India

• Published date: 01 May 2021
• Author: Mohd Shadab Danish,Pritam Ranjan,Ruchi Sharma
• Date: 01 May 2021
• DOI: http://doi.org/10.1002/pa.2211

ACADEMIC PAPER

Determinants of patent survival in emerging economies:

Evidence from residential patents in India

Mohd Shadab Danish

1

| Pritam Ranjan

2

| Ruchi Sharma

1

1

School of Humanities and Social Sciences,

Indian Institute of Technology Indore, Indore,

India

2

Operations Management & Quantitative

Techniques (OM&QT), Indian Institute of

Management Indore, Indore, India

Correspondence

Mohd Shadab Danish, PhD candidate

(Economics), School of Humanities and Social

Sciences, Indian Institute of Technology

Indore, Indore 453552, India.

Email: phd1601161002@iiti.ac.in

Over the period of time, patent filing in India has gone up significantly. However, no

enough evidence is found in the literature about the quality or value of patented

invention in the Indian context. To assess this question, we examine the patent

renewal length (survival of patent) as a proxy of patent value for five different tech-

nology classes. This study uses the renewal information of firm-level patents applied

during January 1, 1995, and December 31, 2005, which were eventually granted.

The data provided by Indian Patent Office consists of 2,025 resident patents

assigned to 266 firms (foreign subsidiary firms and domestic firms). The survival anal-

ysis is carried out via Kaplan–Meier estimation and Cox proportional hazard regres-

sion. The outcomes of this study suggest that the survival length of patents

significantly depends on their technological scope and inventor size. Moreover, the

patents of the firms taking tax credit benefits exhibit lower survival rates as com-

pared with patents of remaining firms. The study also finds that the patents filed by

foreign firms with Department of Scientific and Industrial Research affiliation survive

longer. Among different technological categories, electrical and mechanical patents

are found to be more valuable compared with instrument patents.

JEL CLASSIFICATION

031; 034

1|INTRODUCTION

The use of patent data to measure the output of innovation poses

two fundamental challenges. First, all patents are not equally impor-

tant or valuable, and therefore measuring innovation output using raw

patent count is misleading. Second, due to nonavailability of any for-

mal market for the patents, it is difficult to assign the actual value to

the patents. The literature on patent value has proposed various indi-

cators that are correlated with the value of patents (Hall, Jaffe, &

Trajtenberg, 2005; Trajtenberg, 1990). The value concept of this arti-

cle is derived from Pakes and Schankerman (1984). Patent value refers

to the economic reward the patentee is able to extract from the pat-

ent by excluding others from making, using, or selling an invention.

Thus, we measure the value of patent right (private value of patent)

from the patentee perspective, not the value of underlying technol-

ogy. In this article, we do not focus on social value stemming from the

patented invention or the value of underlying technology as its

calculation requires a different set of methodological tools. According

to Schankerman and Pakes (1986), a patent renewed to its maximum

life (20 years) is considered to be the most valuable patent.

The high-value patent in the present study is considered to have

a longer active life (see Schankerman & Pakes, 1986). Patent lives are

divided into three phases: first, starts from the date of filing to the

date of the request for examination date; second, from the date of

the request to the grant date; and third, is the period between grant

and lapse date, that is, the total active life of the patent (Nikzad,

2011). Whereas, Maurseth (2005) divided patent life into two phases:

pregrant period called “provisional”life and the postgrant period

called “active”life. In order to protect the entitlement of patent, pat-

ent offices' charges annual renewal fee from the inventor. The

renewal fee is one of the significant sources of income for Indian Pat-

ent Office (IPO). Patent life depends upon the value generated during

the protection period for inventor against compulsory renewal fee.

Hence, valuable patents are more likely to be renewed. Schankerman

Received: 7 March 2020 Revised: 7 May 2020 Accepted: 30 May 2020

DOI: 10.1002/pa.2211

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https://doi.org/10.1002/pa.2211