Value of a Patent: Contributing Factors

Understanding the worth of individual patents as well as an IP portfolio as a whole is critical for making strategic business decisions. What factors contribute to the value of a patent? Predicting and proving the worth of a patent must bear in mind the benefits it provides its owners over the course of its lifetime. Because no two patents are identical, it can be difficult to assign a value during mergers and acquisitions, portfolio analysis, or licensing agreements. 

Consider the following factors when determining the worth of a patent:

1. Novelty and Innovation

Your idea must be novel, non-obvious, and useful in order to be patentable. The greater the novelty of your patent, the greater its potential value. Thorough patent research at various points during the innovation process, as well as the careful presentation of relevant prior art, assists the patent examiner in identifying your invention as novel. 

While some inventions are novel and non-obvious, they are incremental improvements over previous technologies. A “pioneering patent” is not an incremental improvement; rather, it is a completely novel product or process that alters the way its owner conducts business. This type of patent provides your business with a competitive advantage, making it more valuable than patenting a minor improvement to existing technology.

2. Patent Language

It is important how you define your innovation in your patent claim. Patents that are detailed, well-written, and accurate, with clear figures, provide more comprehensive protection for your invention. Your patent should not only describe how you intend to use the innovation now, but it must also generalize the technology by explaining other ways it may be used in the future. These patents are more difficult for competitors to effectively design around and provide greater legal protection in the event of infringement. More valuable are patent claims that properly represent the innovation they were written to protect.

3. Profitability Potential

If a patented technology has never been validated, predicting its value becomes much more difficult. A prototype, at the very least, can help demonstrate the value of a patent. Profits drawn directly from a patented technology increase the value of intellectual property. The value of the resulting service or product can also be affected by the industry and target market. A larger market usually means more potential profits and, as a result, a more valuable patent.

4. Strategic Portfolio

A single patent may not provide the necessary protection for a company to design, produce, program, or commercialize a product. A marketable product is frequently the sum of several technologies, each of which is protected by its own patent. These patents become more valuable when they are held jointly in a strategic IP portfolio of adjoining technologies.

5. Legal Value

A patent grants the holder the legal authority to use and protect the described invention. In many cases, this right is what makes the patent valuable. Patented technology that is implemented into marketable products is simple for competitors to replicate; infringement is also simple to detect. This increases the value of the patent over one that is tough to enforce, such as one for a manufacturing process. Defensive patents also have legal value because they can shield a company from infringement lawsuits filed by competitors. 

It demonstrates the value of your intellectual property if an entity requires the rights to your patented invention in order to conduct business. To avoid infringement, the company will need to purchase or license your patent. This legal authority is directly responsible for profit. 

Using third-party resources to decide patent value using a variety of factors can improve the valuation’s credibility. Before making business decisions, conduct an objective analysis of your patent portfolio. This boosts the confidence with which partners, leaders, investors, and other stakeholders make decisions.