 | Valuing IP | |  |
There often comes a stage in a patent’s life when the Patent owner will ask the question how much is my patent worth? The reasons for the question may differ dramatically. From an inventor looking to raise capital so that his invention can move from the back room to the High Street, to a technology leader attempting to put a price on their invention to those that wish to license it, or vice-versa to those lagging in the market who realize that to stay competitive the best option available to them is to seek a license to the use of that new technology.
Regardless of the above, each invention will find it’s own price and will generally depend on five common factors:
Importance of the Patent. Generally, Breakthrough patents are worth more than improvement inventions.The Market. Market size, the number of articles that are likely to be made and the cost of each article also have a significant bearing on the value of a Patent. The Patent Term. Patents have a maximum life of 20 years and therefore a 20-year monopoly. Patents that are just beginning their life and which have longer to run on the their monopoly position understandably have more value. Amount of Prior Art. The number of cited documents or patented products populating an area of innovation also have an effect on the value of the patent. Patent Significance. Every Patent has its own significance in a particular area and will usually form part of an overall IP strategy either, to maximize its earning potential or, to allow other Patents to maximize theirs.
Intangible Assets
Intellectual property rights (IPRs) are often described as being intangible assets. They comprise the company brand, Patent portfolio, R & D strategies and licensing agreements.
Other significant intangible assets are invested in a company’s human capital, its know-how, and include such things as its databases, manuals, product specifications and manufacturing guidelines. All of these intangibles have a value and some effort should be made to quantify them so that when technologies are transferred or a business is bought or sold, or a merger takes place, then a fair market price can be realised.
Almost every SME undervalues its intangible assets.
Next - Due Diligence & Valuation Obligations