On the Effectiveness of Novelty and Inventive Step as Patentability Requirements - Structural Empirical Evidence Using Patent Indicators

Novelty and non-obviousness (inventive step) are patentability requirements designed to ensure a minimum of technological quality for protected inventions. Their effectiveness requires the assumption that private values of patents are positively correlated with technological quality as defined by the patent offices. This premise is taken for granted in classical industries and has recently been taken up for revision in "modern" patenting areas like business methods, but is untested for either one of them. This paper suggests an original test to disentangle the impact of (objective) technological quality - as defined by the patent offices - on private patent value. To do so, the theoretical links between private values of patents, technological invention quality, incentives to oppose patents before the European Patent Office (EPO), and observable patent characteristics are translated into a structural discrete choice equation model. Applying the model to polymer patent data between 1978 and 1990, the paper eventually confirms the assumption that for the chosen sample, objective technological quality enhances the private value of a patent and supports the effectiveness of novelty and inventive step as policy levers. At the same time, the paper refines the understanding of how patent-based measures such as citations are correlated with a patent's commercial value