Over the last years, due to intensive competition in the knowledge economy, legal aspects surrounding intellectual property (IP) rights - including litigation and settlement - have continuously gained in importance. Correspondingly, professional IP management has become an indispensable element of successful value-based management (VBM) in research-intensive firms.

With this text, the author proposes an integrated approach to patent risk and capital budgeting in pharmaceutical research and development (R and D), developing an option-based view (OBV) of imperfect patent protection, which draws upon contingent-claims analysis, stochastic game theory, as well as novel numerical methods. Bridging a widening gap between recent advances in the theory of financial analysis and current challenges faced by pharmaceutical companies, the text re-initiates a discussion about the contribution of quantitative frameworks to value-based R and D management.

Patenting Under Uncertainty

Patent Protection, the Firm, and the Economy
Uncertainty, Irreversibility, and Flexibility
Patent Protection in the Pharmaceutical Industry
Exogenous Patent Risk
and Related Work
Patents as Investment Opportunities
Patent Risk as Jumps in the Underlying Process
From Business Shifts to Jump Processes
Preliminary Conclusion
Endogenous Patent Risk
and Related Work
Patent Risk as an Option to Litigate
Preliminary Conclusion
Conclusion.