German employee inventors’ compensation records: A window into the returns to patented inventions

This paper uses a novel data source, namely German employee inventors’ compensation records compiled in compliance with the German Employee Invention Act of 1957 to estimate the returns to patented inventions. In contrast to patent value estimates obtained from surveys and renewals, these records primarily provide a measure of the value of the use of the invention and not the value of patent protection. While indicators of patent value explain much of the variation in these patent value estimates, the values are only weakly correlated with the estimated renewal value of the patents. The distribution of patent value from these records is highly skew, with the vast majority of the returns earned by a select set of high valued patents, consistent with finding for other measures of patent value. The value estimates however are considerably lower than recent survey estimates with most of the patents having little or no realized value, suggesting that the returns appropriated through the use of an invention may represent only a fraction of the value of a patented invention.