Patent Monetization – Portfolio Valuation

Are you an inventor, an operating company or an attorney?

Our team has decades of experience evaluating patent valuations. We have provided valuation estimates or detailed analyses to investors, company boards, company acquirers and others.


Advantages of a Patent Portfolio Valuation

A key advantage may be to increase the profitability of your business through licensing, selling or raising finance against the patents. For high tech firms that are technology driven, a patent valuation can better establish the net worth of the business; especially if it is an intellectually rich organization i.e. excellent people, skills, technology, IP (patents, copyrights or even trademarks) but perhaps less value held in customers, revenues, brand (trademarks could be a significant or insignificant component here), channels.



Patent valuation approach

The patent valuation approach will depend on how the patent will be utilized. It could be used for pure defense of products in the market, or it could become an asset that provides licensing income. Its importance to the owner and others in the market will depend on how its used, whether for defense, offense or just kept in reserve for monetization, when needed.

Why are we different?

Our approach to patent portfolio valuation is unique because we put greater emphasis on

  1. Investigating the data and evidence that enables a credible technological assessment of infringement and degree of product function that infringes.
  2. Triangulation of the valuation obtained using multiple methods including but not limited to tops down triangulation, market matrix qualitative assessment, PQI (Patent Quality Index) vs. competition, in addition to the conventional income based, market based or even cost based quantitative methods.
  3. Checking for errors. For example we use three separate internal teams to review the valuation and double check the analysis before signing off on the final numbers.
  4. Ability to ‘tune’ the numbers using customizable parameters in case the market or the legal landscape changes or our clients need to consider more than just three scenarios such as most probable case, worst case and best case

What are the reasons to value patents?

A key driver of valuing patents may be to increase the profitability of your business through licensing, selling or raising finance against the patents. For high tech firms that are technology driven, a patent valuation can better establish the net worth of the business; especially if it is an intellectually rich organization i.e. excellent people, skills, technology, IP (patents) but perhaps less valuation held in customers, revenues, brand, channels.

In the last decade, more patents have been traded and sold and licensed than in the past century! In fact over $6B of patent transactions took place in 2011 alone. e.g. Nortel’s sale

Patents have intrinsic valuation and many buyers and owners are deriving a range of benefits from the correct utilization of patents as a strategic business asset.

According to Business Insider, “Tech patents have become a huge commodity in America. Why buy a patent? Well, you’ll be able to sue anybody who infringes it. You could also license it, and use the technology it covers all you want. With these lucrative possibilities in mind, tech companies typically buy patents in big bundles.”

Remember that the valuation of a patent is in the eyes of the beholder. i.e. Each buyer will see the patent as being of a different valuation for their specific needs.

Patent Valuation at the click of a button

Patent Valuation at the click of a button?

Patent Valuation Can Be Calculated Using Various Approaches

Some of the typical methods used are the income method and the comparables method.

In the income method, a patent’s valuation is calculated by summing up all the royalty revenues that this patent would accumulate were it to be licensed to the infringing product suppliers. The revenues of those infringing products, market size, degree of infringement and ability to license the patent to them all play into the valuation derived.

Patent valuation determined using the comparables method is similar to how comps work with house listings. However the patent transaction market is highly opaque and the lack of transparency of the valuations obtained for patents sold leaves this method for better use as a checking mechanism than as a primary patent valuation approach.

Yet another valuation method derives the patent value from adding up all the costs incurred in developing the patent. This cost based valuation is not useful, except for accounting purposes, as many patents may have cost hundreds of thousand of dollars to develop but may be worthless. On the other hand you could have spent just $25,000 on a small patent portfolio that may be worth a million dollars.