The value of software-related The value of software-related patents in the European Patent patents in the European Patent System System Salvatore Torrisi Salvatore Torrisi Department of Management, Università di Bologna and Department of Management, Università di Bologna and CESPRI-Bocconi CESPRI-Bocconi [email protected][email protected]EUPACO, What Future for the European Patent System? 15&15 EUPACO, What Future for the European Patent System? 15&15 May 2007 May 2007
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The value of software-related patents in the European Patent System Salvatore Torrisi Department of Management, Università di Bologna and CESPRI-Bocconi.
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The value of software-related The value of software-related patents in the European Patent patents in the European Patent SystemSystem
Salvatore Torrisi Salvatore Torrisi
Department of Management, Università di Bologna and CESPRI-Department of Management, Università di Bologna and CESPRI-Bocconi Bocconi [email protected]@unibo.it
EUPACO, What Future for the European Patent System? 15&15 May EUPACO, What Future for the European Patent System? 15&15 May 20072007
• What is the value of EPO patents?What is the value of EPO patents?
• How to find “software-related” How to find “software-related” patents in the EPO dataset?patents in the EPO dataset?
• what is the value of “software-what is the value of “software-related” patents in Europe? related” patents in Europe?
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ResearchResearch
• This presentation is based on Thoma and This presentation is based on Thoma and Torrisi ( 2006) and Hall-Thoma-Torrisi (2006)Torrisi ( 2006) and Hall-Thoma-Torrisi (2006)
• See See www.cespri.unibocconi.itwww.cespri.unibocconi.it/working/working paperspapers
• Research framework: “Study of the effects of Research framework: “Study of the effects of allowing patent claims for computer-allowing patent claims for computer-implemented inventions” sponsored by the implemented inventions” sponsored by the European CommissionEuropean Commission
• DisclaimersDisclaimers:: The opinions expressed are those of the speaker The opinions expressed are those of the speaker and do not necessarily reflect in any way opinions of the European and do not necessarily reflect in any way opinions of the European Commission or any of the partners Commission or any of the partners
MotivationsMotivations• Traditionally, patents are a weak Traditionally, patents are a weak
instrument to protect innovation in instrument to protect innovation in many sectors (many sectors (Cohen, Nelson and Cohen, Nelson and Walsh, 2000)Walsh, 2000)
• … … why, then, so many patents why, then, so many patents around? around?
• Increased tech opportunities? Stronger Increased tech opportunities? Stronger enforceability? Lower barriers to enforceability? Lower barriers to patent?patent?
• What is their value to the owners? What is their value to the owners?
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MotivationsMotivations
• What about “software” patents?What about “software” patents?
• EPC (art. 52): computer programs “as EPC (art. 52): computer programs “as such” not patentable but …EC has such” not patentable but …EC has been considering standards for been considering standards for “computer implemented inventions” “computer implemented inventions”
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1. How to find “software” 1. How to find “software” patents?patents?1.1. Keywords method (Bessen-Hunt 2004)Keywords method (Bessen-Hunt 2004)
– Search for Search for ((software) OR (computer AND ((software) OR (computer AND program)) AND NOT (chip OR semiconductor program)) AND NOT (chip OR semiconductor OR bus OR circuit OR circuitry <in> TI) AND OR bus OR circuit OR circuitry <in> TI) AND NOT (antigen OR antigenic OR chromatogra NOT (antigen OR antigenic OR chromatogra phy)phy) in the patent document (title and full text) in the patent document (title and full text)
2.2. Patent class method (Graham-Mowery, Hall-Patent class method (Graham-Mowery, Hall-MacGarvie)MacGarvie)
– IPC classes in the patent portfolios of the IPC classes in the patent portfolios of the world’s largest specialized software firms world’s largest specialized software firms
– 3,518 classes-subclasses (117 if only the 3,518 classes-subclasses (117 if only the main IPC codes in each patent are considered). main IPC codes in each patent are considered).
3.3. Hall,Thoma and Torrisi (2006): a combination of Hall,Thoma and Torrisi (2006): a combination of these two methods these two methods
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Cumulative software patents granted by EPO
0
3000
6000
9000
12000
15000
18000
1978 1982 1986 1990 1994 1998 2002
Year of application
Num
ber
IPC method BH method
Cumulative number of “Cumulative number of “software”software” patents granted by the EPO by year of patents granted by the EPO by year of applicationapplication
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Concentration of “software” Concentration of “software” patentspatents
0%
20%
40%
60%
80%
100%
0% 20% 40% 60% 80% 100%
cumulative share of assignees
cu
mu
lative
sh
are
of p
ate
nts
keywordsmethod
IPCmethod
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““software” patents as a software” patents as a share of all patents: USPTO share of all patents: USPTO vs. EPOvs. EPO
0%
2%
4%
6%
8%
10%
12%
14%
16%
1981 1984 1987 1990 1993 1996 1999 2002 Year
% o
f all
pate
nts
EPO - keyword method
EPO - IPC method
USPTO – keyword method
USPTO - IPC method
USPTO - HM method
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2. What is the value of ‘software-2. What is the value of ‘software-related’ patents in Europe?related’ patents in Europe?
• Publicly-traded firms from 17 Publicly-traded firms from 17 European countries (1984-2002)European countries (1984-2002)
• Data sources: Data sources: – EPO PATSTAT, DelphionEPO PATSTAT, Delphion– Bureau van Djik’s Amadeus, Hoovers, Bureau van Djik’s Amadeus, Hoovers,
All equations include country dummies, year dummies, and sector dummies.
Elasticities from nonlinear least squares
TableLog Q regressions 1984-2002
(5444 observations, 1,046 firms, 17 countries)
Nonlinear least squares (robust s.e.s)
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Main resultsMain resultsvariablevariable Effect on M/AEffect on M/A commentcomment
R&D stock/AR&D stock/A ++ +++ + < than in USPTO< than in USPTO
Pat stock/RDstkPat stock/RDstk + ++ + > than in USPTO> than in USPTO
Cites/Pat stockCites/Pat stock ++ from USfrom US
Swpatstk/RDstkSwpatstk/RDstk Not significantNot significant H-M (2006):+/signH-M (2006):+/sign
Cites/SwpatstkCites/Swpatstk Not significantNot significant H-M (2006): sign. x H-M (2006): sign. x specialised sw firmsspecialised sw firms
LS composite LS composite index (software)index (software)
++ (software: ++ (software: not sign)not sign)
Total patents: similar Total patents: similar to LS(2004) on US datato LS(2004) on US data
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Conclusions (1) Conclusions (1) • EPO patents worth more to European firms EPO patents worth more to European firms
than US patents to US firmsthan US patents to US firms• But citation-weighted EPO patents worth But citation-weighted EPO patents worth
less than citation-weighted US patents. less than citation-weighted US patents. • Why?Why?
– Are EPO patents different? Are European firms Are EPO patents different? Are European firms different?different?
– in the EPO system cites are assigned by in the EPO system cites are assigned by examiners … upper bound to the number of examiners … upper bound to the number of citationscitations
• Future research: US patents and EPO Future research: US patents and EPO patents for the same sample of firms patents for the same sample of firms
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Conclusions (2)Conclusions (2)
• LS index: Investors have information LS index: Investors have information to distinguish patents with a to distinguish patents with a consistent set of characteristics consistent set of characteristics (forward cites, family size and tech (forward cites, family size and tech fields)fields)
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Conclusions (3)Conclusions (3)
• Why are software patents not valued by Why are software patents not valued by the market? (the private value)the market? (the private value)
• few observations and high concentration few observations and high concentration of EPO software patsof EPO software pats
• Investors see these as ‘strategic’ patents Investors see these as ‘strategic’ patents in a field with highly cumulative, in a field with highly cumulative, sequential change sequential change litigations, litigations, transaction costs … transaction costs …
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What about the social value of What about the social value of software patents?software patents?• Sequential, cumulative changeSequential, cumulative change• Relatively large number of claims/patentRelatively large number of claims/patent• Lack of documented prior artLack of documented prior art• IP protection reinforces increasing returns IP protection reinforces increasing returns
(network externalities)(network externalities)• The low (private and social?) value of sw The low (private and social?) value of sw
patents suggests: patents suggests: – reduce the scope of patents (n. of claims)reduce the scope of patents (n. of claims)– Allow a limited right to reverse engineering Allow a limited right to reverse engineering – More aggressive compulsory licensingMore aggressive compulsory licensing– …………..
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thanksthanks
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Appendix: main variables and Appendix: main variables and resultsresults
• Market value (Market value (VV): market cap (equity) plus current ): market cap (equity) plus current and non current liabilities less current assets plus and non current liabilities less current assets plus inventoriesinventories
• Tangible assets (Tangible assets (AA): gross fixed assets and ): gross fixed assets and inventories less [depreciation, depletion, and inventories less [depreciation, depletion, and amortization (accumulated), and other amortization (accumulated), and other deductions]deductions]
Index this year 1933 2.16 6.46 0.02 0.00 1.30 -7.78 65.79Index stock 1933 11.67 30.58 1.50 0.35 6.79 0.00 272.81Index stock/Pat stock 1933 0.21 0.21 0.15 0.07 0.28 0.00 2.50
SW index this year 794 0.28 1.23 0.00 0.00 0.03 -5.26 15.85SW index stock 794 1.38 3.67 0.44 0.15 1.15 0.00 42.26SW index stock/SW pat stock 794 0.35 0.29 0.31 0.13 0.46 0.00 2.41*In millions of current euros