Report Offers Insight Into Patent Valuation

It can be difficult to put a price tag on intellectual property. Therefore, a new report published by IPOfferings LLC may be useful to patent holders considering selling, buying, or licensing a patent.

The company’s Calendar Year 2012 Patent Value Quotient includes a wealth of information about patents sold during the prior year. It includes the seller and buyer of the portfolio (unless they requested that they be anonymous), the technology of the patents, the number of issued U.S. Patents, and the quotient, which is determined by the total sale divided by the number of patents to produce the average paid per patent. For the 35 patent transactions included in the report, the median selling price per issued U.S. Patent was $220,588, and the average selling price per issued U.S. Patent was $373,573.

While the report offers insight into prior patent deals, there are a number of factors that can impact a patent’s value. Below are just a few examples:

  • nvention Significance: Innovative patents that represent a significant breakthrough in an industry (i.e., Thomas Edison’s light bulb) are the most valuable. While not every patent is a game changer, patents that give the owner a monopoly in a specific corner of the market or force competitors to license the technology are often more valuable than incremental patents that represent small changes to existing products or processes.
  • The Strength of the Patent: The quality of the patent itself is also taken into consideration. Factors that may be evaluated include the qualifications of the law firm that prepared the patent and the examiner that granted it, the number of inventors listed, and the amount of prior art.
  • Patent Term: The business life of a patent is another key consideration. In general, a patent will be less valuable if it is approaching the expiration of its term. Similarly, a patent that was recently issued may also be less desirable because its validity is likely untested.
  • Market Conditions: A patent buyer wants to make sure that the patent will generate money, either through product sales or licensing revenue. Therefore, the markets condition in the particularly industry often become important. In highly competitive markets, a buyer may even overvalue a patent that allows it to block a competitor or bolster an existing patent portfolio.

Even taking all of these factors into account, it is important to recognize that all patents and their underlying inventions are unique.

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