Abstract
We examines how firms manage their intellectual property rights (IPR) by observing their patent renewal decisions. Once a patent is granted, U.S. patent holders must pay renewal fees in 3.5, 7.5, and 11.5 years after the grant date to preserve their rights to exclude others from using the invention. We suggest that firms employ a combination of two strategies in managing their IPR portfolio. Specifically, firms build patent thickets by renewing patents in their core area of expertise and those situated in more fragmented technological markets. At the same time, firms consider patents as real options by renewing those that present greater breath in terms of technological opportunities and those in areas with fast technological clockspeed. We test these predictions by analyzing the renewal decisions for the population of over 2 million patents approved by the United States Patent and Trademark Office between 1987 and 2006.
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