THE IMPORTANCE OF PATENT SCOPE - AN EMPIRICAL-ANALYSIS

This article examines the impact of patent scope on firm value. I develop a proxy for patent scope based on the International Patent Classification scheme. Using a sample of 535 financing rounds at 173 privately held venture-backed biotechnology firms, I show that the breadth of patent protection significantly affects valuations. A one standard deviation increase in average patent scope is associated with a 21% increase in the firm's value. Broad patents are more valuable when substitutes in the same product class are plentiful, a finding consistent with theoretical suggestions.