Composite Value Index of Design Patent Indicators

Previous literature on the market valuation of knowledge assets has to a large extent analysed R&D investment, advertising expenditures, and other IP assets such as patents and trademarks, while overlooking the appraisal of how design IP rights contribute to the value of a firm. Furthermore, analysis of IP indicators appraising the value heterogeneity of design IP rights is an almost unexplored topic. This paper aims to fill this gap by devising a composite value index that combines a total of eighteen indicators for three dimensions: the quality of a patent’s prior art, the patent prosecution characteristics, and the economic impact of the patent. Our regression analysis of a patent’s enforcement value demonstrates that the proposed composite value index shows a satisfactory explanatory power as compared to when the indicators are analysed as such. Our firm-level analysis employing Tobin’s Q model confirms that the proposed composite value index of design patent indicators is positively and significantly correlated with a firm’s market value above and beyond its other knowledge assets, including R&D investment, advertising expenditures, patents, trademarks, and relative value indices of IP assets.