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IP Intelligence

What is a Patent Worth? Predicting Patent Value with Insight Reports

By November 6, 2020April 7th, 2021No Comments

How much is a patent worth?

This common question among patent holders is not an easy one to answer. Every patent is unique, and the transfer value of a patent depends on the needs and resources of the buyer and seller. Patent valuation can fluctuate dramatically as technology, litigation, consumer behavior, and other factors shift. While there is no simple way to predict the value of a patent, it is an important component to consider within your IP strategy.

Research by Tynax Patent Brokers classified patent buying activity worldwide into one of seven categories, A through G.

  • A: These invalidated or expired patents are worth $0.
  • B: These patents are not litigated or licensed. They include no broad claims. They’re valued at between $10,000 and $30,000.
  • C: These patents have not been litigated, but they do include broad claims and/or have a large market. They are worth $30,000 to $100,000.
  • D: These patents have several competing buyers, putting their value between $100,000 and $500,000.
  • E: These patents have known infringers, and they have been litigated and won. This puts their value around $500,000 to $1,000,000.
  • F: These patents have known infringements by Fortune 500 companies. After winning litigation, their value can exceed $1,000,000.
  • G: These patents are the industry standard, putting their value well above $1,000,000.

Of course, there are patents that will defy this—or any—model. However, if we consider the average value of collections of patents with the indicated qualities, this model may be a useful patent value predictor.

Using Insight Reports for Patent Valuation

We used two of our Insight Reports, the Patent Vitality Report (PVR) and Portfolio Intelligence Report (PIR), to compare IP.com’s patent valuation methods to Tynax Patent Brokers’ model. The Insight Reports use the selected Patent of Interest’s (POI) abstract and claims to perform a concept search, which identifies the 100 most comparable patents. These patents comprise the POI’s peer group.

The PVR scores individual patents using Patent Factor Indexes. There are 14 “factors” within the index, each representing a specific characteristic of the patent and enabling a quantitative comparison of the patent to its peer group. Similarly, the PIR calculates the Patent Insight Indexes for a collection of patents. 

We have previously calculated the average of all 14 Patent Factor Indexes for each patent in a random sample of all US patents. Our results were a well-defined bell-shaped distribution of mean value scores, centered at a score of about 450. For our comparison of Insight Reports to Tynax Patent Brokers’ model, we studied the distribution of average Patent Factor Indexes for collections of patents representative of each of the groups shown in the patent valuation model, A through G.

These results demonstrate the correlation between IP.com’s Insight Reports and an objective patent value predictor. These results should, however, be qualified with these caveats:

  • The patents in the analysis were restricted to US patents issued in the last 30 years.
  • Some of the patent collections were relatively small, especially for groups E, F, and G.
  • The average of the individual patent Patent Factor Indexes 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.