Patent Remedies and Patent Valuation: Evidence from China

This paper investigates the role of patent enforcement in the private value of patent valuation and firm innovation decisions in China. The structural estimation of patent value and counterfactual simulations show that strengthening patent enforcement by promoting damage awards significantly boosts the private value of utility models- the inferior type of patents- while leaving the private value of invention patents- the more innovative type of patents- almost unchanged. A series of reduced-form analyses on a comprehensive sample of Chinese patenting firms confirm the theoretical prediction and indicate a tendency of firms to shift towards incremental innovation.