AnalyticsInsight ReportsIntellectual PropertyPatent Valuation

What is my Patent Worth?

By February 3, 2020August 3rd, 2020No Comments

Patent valuation is not easy to address.

How can I determine a patent’s worth? This is a common question and is not easy to address. The truth is, there is no simple answer. What is the best approach to patent valuation? Patent brokers have put a lot of thought into this question and while there is no perfect answer, it is commonly recognized that certain events in a patent’s lifecycle can be tied to value.

The simple model* below reflects how a single patent may be valued based on actual transactions seen by brokers in the U.S. and worldwide.

patent valuation model

 

Generally, patent acquisition value increases based on litigation results. Of course, every patent is unique. The transfer value of a patent depends on the needs and resources of the buyer and seller. If we step back and consider the average value of collections of patents with the indicated qualities, this model might be useful for predicting value. We just need to place the patents in the appropriate A – G categories (G is top of the triangle – Industry-standard).

While challenging to predict a patent’s worth, analytic tools can provide the means for correlating collections of patents to this valuation model. The Patent Vitality Report provides Patent Factor Indexes (PFIs) to score an individual patent in four key dimensions, novelty, patent strength within a technology space, market position, and competition. Each factor focuses on a specific characteristic of the patent and enables a quantitative comparison of the patent to the peer group or related art. IP.com’s Portfolio Intelligence Report batch calculates the Patent Insight Indexes for a collection of patents.

Download a sample of our PVR here:

Patent Valuation Tools

IP.com’s proprietary, cognitive retrieval engine uses the text found in the abstract and claims of the defined Patent of Interest to perform a concept search, which identifies the 100 most comparable patents within the peer group.

Analysis shows that if we calculate the average of all PFIs for each patent in a random sample of all US patents, we get a well-defined bell-shaped distribution of mean value scores, centered at a score of about 450. For this sample analysis, the distribution of average PFI scores for collections that represent each of the groups shown on the patent valuation model was studied.

Here are the results:

Group Scoring Range
Group G 575-650
Group E/F 525-575
Group D 500-525
Group B/C 450-475
Group A < 450

This demonstrates that the Patent Factor Indexes really do correlate to an objective measure of patent value.

A couple of qualifiers:

  • the patents in the analysis were restricted to U.S. patents issued in the last 30 years; some of the collections were relatively small, especially for groups E, F, and G.
  • the average of the individual patent PFI mean value scores for any patent collection is itself a statistic, with a Confidence Interval (CI) range. Typically, for a collection of 1000 patents, the 90% CI interval is +/- 25 around the mean.

Do you have a collection of patents that have been through litigation? Contact us for more information about how we can help you find out what your patents are worth.