A Research On Patent Value Appraisal Based On Real Options

Since the knowledge economy, patents play a more and more important role in marketing for enterprises and risks brought by the uncertainty of investing in, holding or developing patent have been increasing. Because of the high uncertainty of intangible assets such as patent, such traditional assessing ways as NPV are not suitable to evaluate patents, especially when the patent investment process is dynamic.The advantage of Real Options theory is that it can reflect the investment value and potential value of a patent according to the price fluctuation in the market. Real Option emphasizes the importance of stages of the investment process, which is especially important for the assessment of patent investment project with high-uncertainty and high-risk.Currently the application of Real Option is flourishing in investment appraisal, strategic merge, managing scope and target for investment. The development and investment value of Patent are influenced by many factors, such as technique, economy, law, etc. This paper analyses the factors that have great impact on patent's value in detail, and summarizes the relationship between Real Option and patent's value. After precise Mathematical Analysis, the paper applies the Black-Scholes equation to evaluating patents. It also expatiates the relationship among patent's value, wiener process and Ito process. The paper concludes the expressions of patent's value based on B-S option price equation. Based on the degree of market monopoly, the paper distinguishes the differences between trade and non-trade patent's value. Finally, this paper develops and implements a simulation approach to the value of non-trade patent.Based on the characteristics of patent investment projects, this paper analyses the random features in the process of patent investment and divides patents into three kinds, that is, patent investment that can be postponed within a limited time period, patent investment paused by some accident and patent investment in an expanding period. Based on Real Option, the paper puts forward corresponding evaluating models and analyses the value of patent investment in three conditions: postponed, paused and expanded. At last the paper gives an example and provides a new method for patent investment decision-making. Finally the paper summarizes the conclusions, the innovations, the limitations of the research and future study.