Economic valuation of patents as real options

Abstract

In today's high competitive business world is for the successful firms necessary to manage not only their tangible property but also intangible assets. The main goal of this article is to approximate the application of real option methodology for patent valuation that takes into account the value of flexibility in investment decision making. In this paper is shown how to use real options methodology for valuation of patent. The theoretical background of real options is illustrated by the Black-Scholes model in the sample case adapted to Aswath Damodaran (Damodaran, 2001). This paper is completed by estimation of contemporary situation of patents granted by the Industrial property office in the last five years. The last part discuss in which situations make sense to use real options for valuation patent and what is the most common problems of using real options.