Patent Valuations across Markets - Patent Price, Royalty Rate, and Damage Award, Part I : Patent Valuations Across Transaction and Licensing Markets

Patent valuations as reflected by patent sale price and licensing royalty rate have been frequently discussed and sometimes hotly debated in mass media, expert analysis, and scholastic research. However, there have been no studies to examine the relationship, or the lack thereof, between such valuations across the markets of patent transaction and licensing. This study is designed to fill this research gap. By integrating empirical data from the two markets, this article is set to shed light on the relationship between patent transaction valuations and patent licensing valuations.The data analysis demonstrates that patent price and royalty rate generally comove with each other, confirming the hypothesis posited by the valuation economics. Also, it seems the valuations across patent transaction and licensing markets have been on a downslope, and that the decline of all valuation measures from their peaks in 2014 were substantial. Our data analysis raises an intriguing question: What are the driving forces behind the comovement of the valuations across patent transaction and licensing markets? For example, what are the key determinants that have caused the decline in royalty rate and patent price from their peaks in 2010 and 2011 to their troughs in 2013? What sent the valuations in both markets plummeting in 2016? Since there were no evident supply and demand shocks in these markets, such fluctuations must have been caused by certain exogeneous factors. Part II of our study will address these issues by including patent damage award data from litigation market