Understanding the value of both individual patents and an IP portfolio as a whole is essential to strategic business decisions. What makes a patent valuable? Predicting and proving a patent’s value must take into account the benefits it offers its owners throughout its lifetime. No two patents are identical, so assigning a value during portfolio analysis, mergers and acquisitions, or licensing agreements can be difficult.
To value a patent, consider:
To be awarded a patent, your idea must be novel, non-obvious, and useful. The more novel your patent is, the more potential value it offers. Thorough patent research at multiple points during the innovation process and careful presentation of relevant prior art help identify your invention as novel for the patent examiner and future business decisions.
While some innovations are novel and non-obvious, they serve as incremental improvements over past technologies. A “pioneering patent” is not an incremental improvement; rather, it’s a completely innovative product or process that changes how its owner does business. This type of patent offers your business a competitive advantage, making it more valuable than patenting an incremental improvement to existing technology.
How you describe your invention in your patent claim matters. Well-written, detailed, and accurate patents with clear figures offer more thorough protection for your invention. Not only should your patent describe how you see yourself using the innovation now but it should also generalize the technology, describing other ways it may be used in the future. These patents are harder for competitors to successfully design around and offer more legal protection in case of infringement. Sound patent claims that truly represent the technology they were written to protect are more valuable.
If a patented technology has never been validated, its worth is much harder to predict. At the very least, a prototype can help illustrate the value of a patent. Profits (or savings) derived directly from a patented technology make the intellectual property more valuable. Value can also depend on the industry and target market of the resulting product or service. A larger market often means more potential profits, and therefore a more valuable patent.
A single patent may not offer the protection a company needs to design, manufacture, program, or market a product. Often, a marketable product is the sum of many technologies, all protected by individual patents. When these patents are held together in a strategic IP portfolio of adjacent technologies they are more valuable.
A patent offers its holder the legal right to both use and protect the invention described. This right, in many circumstances, is what makes the patent valuable. Patented technology that is incorporated into marketable products is easy for competitors to replicate; it’s also easy to detect infringement. This makes the patent more valuable than a patent that is difficult to enforce, such as that of a manufacturing process. Defensive patents also offer legal value, because they can protect a business from competitors’ infringement lawsuits.
If an entity needs the rights to your patented invention in order to do business, it proves the value of your intellectual property. The company will need to buy or license your patent to avoid infringement. This legal right is directly responsible for profit.
Relying on third-party resources to determine patent value using a range of factors can enhance the credibility of the valuation. An objective analysis of your patent portfolio before making business decisions increases the confidence with which leaders, partners, investors, and other stakeholders make decisions.