Understanding Patent Valuation Methods

Patents are assets because it is an item with which you can exclude others from having an unauthorized access to it, second, it has a monetary value which can be transferred to someone else. Third, it has an ownership that vests rights in the inventor.

If patents are assets then it must have some monetary value just like products and services have some monetary value. So, what is the value of a particular patent and how to determine the same? This article outlines some basic points that determine how to calculate value of a particular patent. However unlike products and services which have a fixed value two patents can’t have same value unless the two inventions are co-related.

There are mainly 3 ways through which monetary value of a patent can be assessed; these three methods are as below:

  1. Cost methods
  2. Income methods
  3. Market methods

Cost methods: In cost methods, we calculate the monetary value of a patent by looking at the costs incurred by the inventor in inventing the patent.  Below are some of the criteria that we look into while doing cost methods assessments of patents:

  • Cost of development (R&D, Labor, Interest etc)
  • Cost of patenting
  • Maintenance costs
  • Determining the cost to manufacture the same patent from scratch.

Income methods: In income methods, we assess the monetary value of a patent by assessing the income it can generate. With this, we assess if the product is being liked by people and if the trend may continue for estimated period. However, this method is comparatively risky because many other associated risks should be considered in advance.

Market methods: With this method, we use various comparable methods to determine the monetary value of a patent. For example, with this method, we assess what was the value of similar patents sold in similar circumstances. However, the greatest drawback of this method is that the patent related data are very confidential and access can be denied by the concerned parties.

All we can say is that in this technological era innovation is the most important means of staying competitive in the ecosystem and patents play a huge role in it. However, before going to buy, sell or use a patent it is important to assess the real worth of a patent and it can be done by

For businesses, innovation is the most important means of staying competitive in the … It is very important for businesses to assess the real worth of the patent. The real worth of a patent can be determined by putting a robust patent valuation campaign in place.

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