Patent valuation with a fuzzy binomial model

Patent valuation has always been a difficult task due to the considerable uncertainty involved in both the patent application procedure and the patent exploitation. This paper proposes, under the fuzzy framework, a multiperiod binomial approach for patent valuation of the latter case. We depart from the model introduced in S. Muzzioli et al. [1] by utilizing binomial tree to simulate the movement of patent monopoly benefits through time and representing the volatility of the patent monopoly benefits with fuzzy numbers, which is triggered by the fact that, in most cases, the Intellectual Property Rights (IPR) managers may not have good information on the parameters, and that the conventional probability theory is incapable of capturing this type of imprecision. Our model also reveals the values of the managerial flexibilities embedded in the patent exploitation.