Hybrid Approach<\/a> to determine a fair market value of the patent.<\/p>\n\n\n\n4. Hybrid Approach<\/u><\/strong>: This approach combines different methodologies and is the most comprehensive of all the above approaches. It helps the seller reach a well-calculated and reasonable patent value and is divided into two parts \u2013 Quantitative and Qualitative.<\/p>\n\n\n\nThe first part of this hybrid approach is the Quantitative Analysis<\/strong>. It involves a market analysis of the technology under study, estimating how much revenue would be generated by the subject technology utilization, whether the technology is fresh or obsolete in the market, discount rate, etc.<\/p>\n\n\n\nIn addition, many other factors capable of influencing the market are also considered to arrive at an expected value. These are listed below:<\/p>\n\n\n\n
1. Total Addressable Market (TAM)<\/strong>: This is the complete market coverage available to a product or service if they achieve 100% market share with no competition.<\/p>\n\n\n\n2. Market Coverage: <\/strong> This factor considers whether the subject technology already exists in the market. If yes, where the patented technology stands in the market, its competitors, etc., are also ascertained.<\/p>\n\n\n\n3. Market\/Industry Size:<\/strong> This examines the market size or the industry size relevant to the patented technology. Moreover, it also factors in the industry’s future growth prospects to determine a more realistic patent value.<\/p>\n\n\n\nThe second part of the Hybrid Approach is the Qualitative Analysis<\/strong>, and is the most important one. It involves rigorous analysis of the Intellectual Property understudy.
Although we get an expected value from the Quantitative Analysis, the second part of Qualitative Analysis makes the evaluation even more reliable. Furthermore, since the applicability of the patent depends on numerous factors, it would be prudent to analyze these factors to understand the actual worth of the Intellectual Property.<\/p>\n\n\n\nThere are over 15 factors considered under this part. Each of these is assigned a different weightage based on their importance.<\/p>\n\n\n\n
A few of such critical factors with a higher weightage is discussed below:<\/p>\n\n\n\n
1. Market Applicability<\/strong>: It covers the aspect of the patent’s applicability to the market and directly impacts\/drives the overall valuation of the patent. As mentioned above, we execute Infringement Analysis to assess the same.<\/p>\n\n\n\n2. Competition:<\/strong> This factor assesses the competition level that the patented technology may face. It covers two phases: the first is Competitiveness, i.e., the quality of competition, and the second is Crowdedness, i.e., the quantity of competition. Crowdedness is a measure of market penetration. Considering the existing products that the new idea\/product\/invention will compete with, the barriers to market entry are likely to be low, high, or moderate. Competitiveness is a measure of quality, bearing in mind the existing products that the new invention\/idea\/product will compete with (including price, quality, etc.); the invention\/idea\/product will likely be perceived as inferior or superior with added advantages.<\/p>\n\n\n\n3. Life of the patent:<\/strong> This factor takes account of the remaining life of the patent from the time the deal is reached. Through this information, the buyer gets to know about the time period under which they can utilize the patent. For example, if someone is buying a patent, they would need to know how long he would be able to protect the idea from others using\/copying it. A patent about to expire soon might be less valued as compared to a patent with ten years of remaining life. Therefore, the patent life is a vital determinant in the buying strategy.<\/p>\n\n\n\n4. Reason for Allowance:<\/strong> This factor covers whether the reason for allowance was based on a broader or narrower technical concept. For example, if the patent was granted on a broader concept, such as making a group video call, it would be more valued than a patent that was granted on a narrower concept such as muting\/unmuting a participant in a group video call. And the same would be valued differently to a patent claiming a procedure to schedule a group video call between participants. <\/p>\n\n\n\nReason for Allowance is the basis on which the patent has been granted. It implies that the claims made in the patent should have ample coverage for the successful utilization of the patent. For this, the analysis of the patent prosecution history is made to determine the coverage. The broader the concept covered under the patent, the higher its value. Besides, it can drastically reduce or increase the value of the portfolio.<\/p>\n\n\n\n
5. Buyer’s need:<\/strong> This factor considers the buyer’s nature or needs. The value of a patent\/portfolio actually varies from buyer-to-buyer, depending on what their end objective is. As a seller, it becomes important to define the current value of the patents in the context of the specific situation with the buyers. One must evaluate how a buyer would use these patents in the future and gauge the worth of these patents today and in the future.<\/p>\n\n\n\nFor example, if someone is buying a patent\/portfolio to prepare defence against their competitors, and these competitors are already encumbered, then the value of the patent\/portfolio would drastically decrease for that buyer as they would not be able to protect themselves using these patents against their competitors. The effect could be so much that the buyer might not want to buy these patents at all.<\/p>\n\n\n\n
6. Encumbrances:<\/strong> Here, it is checked whether there are any existing encumbrances on the subject patent portfolio. For example, a patent licensing agreement is an encumbrance because it prevents a company (buying a patent) from obtaining royalties from a company that has already licensed the patent. This can limit the applicability of the patent and, thereby, reduce its value.<\/p>\n\n\n\n<\/span>Step 3: Identifying the potential buyers<\/span><\/h2>\n\n\n\nAfter evaluating the best possible value for our patent, now is the time to identify the potential buyers. In the third step, we search for the players that might be interested in the subject technology of the patent and there are several ways to do so, as outlined below.<\/p>\n\n\n\n
The easiest way is when you have identified a potential infringement – to locate the market players who are<\/strong> infringing on the patent<\/strong> in any manner. Such infringers become our primary target to pitch the offer and can be given two options. Either they can buy\/license the patent or alter their process to avoid infringement. If the infringer is not ready to accept any of the two, they can be cautioned with litigation.<\/p>\n\n\n\nHowever, if there are no infringements, the other way is to look for the players facing the same problems<\/strong>. These are the players operating in the related domain and can benefit from the patent’s subject technology. This is done by searching around companies in the related field to understand the nature of their business and the challenges they face. Once they are found, they can be apprised of the solution to their problem using the patented technology. This will enhance the chances of selling the patent at a reasonable value; eventually creating a win-win scenario for the seller and the buyer.<\/p>\n\n\n\nAnother way is to locate the players<\/strong> filing patents in the same domain. <\/strong>Identifying such players would mean that they are interested in the respective technical field and may buy the patent. The reason is that the addition of such patents will bolster their patent portfolio, and, hence, they can be the prospective buyers.<\/p>\n\n\n\nOne can also search for the players looking for opportunities<\/strong> to enter the market. Such players would need an edge to compete with the market leaders, and a patent related to that particular field can be of great use to them. Hence, purchasing a patent that gives them the required edge over others is likely. Reason being – taking licenses from market leaders could be very expensive or even not feasible; doing in-house R&D can also prove to be costly. Therefore, buying the patent inorganically becomes the best choice for them.<\/p>\n\n\n\nTherefore, while searching for such players, the seller should check whether the company has in-house R&D practice or a history of patent\/company acquisitions (inorganic growth)<\/strong>. An in-house R&D practice indicates that the company is into organic growth for its patent portfolio and may not be very keen on buying them. However, if it has a history of acquisitions, it is more inclined towards organic growth, and it may readily purchase the patent.<\/p>\n\n\n\nHence, companies opting for patent or company acquisitions to grow their patent\/product portfolios could be good candidates for selling the subject patent portfolio.<\/p>\n\n\n\n
<\/span>Step 4: Approaching the identified prospects<\/span><\/h2>\n\n\n\nIn order to finalize the identified prospects, it is crucial to take the initial steps of reaching out to the prospects properly. While a proper strategy can lead to the desired outcome, a wrong one can close the deal before it starts.
Therefore, for an apposite execution, the preliminary step is to package the list of patents properly. And this should reflect in the insights offered by an Infringement Analysis. This way, it keeps the pitch more aligned to the needs of the market and the client. At Sagacious IP, this is made easy by including inputs from Infringement Analysis, wherein the deal drivers and the enabling patents are identified and appropriately packaged, as explained above.<\/p>\n\n\n\n
A Pitchbook<\/strong> is prepared to reach out to prospective companies and negotiate the price in this step. It includes all the information that helps a potential licensee\/buyer understand how a particular invention can benefit them. For example, it contains facts about the patent, the relevance of technology, the problem it addresses, market study, other benefits, etc.<\/p>\n\n\n\nTo summarize, we execute the given set of activities to keep the process of patent selling organized and aligned to the seller’s goals by:<\/p>\n\n\n\n
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