Every now and then I get a call from a client or perspective client who asks, “How much is my patent worth?”
My standard reply typically goes, “How much do you think it’s worth? Why do you think that? And why do you want to know?”
Most often I get a “pie in the sky” answer with little to no analysis to support the suggested value.
Worse yet, the reason they want to know is usually because they spent a lot of money to get the patent — so it must be worth a lot, right? Not necessarily.
To get an idea of what a patent may be worth, certain questions need to be answered. These questions include (but are not limited to):
1) What is the true scope of the patent? Has this been explained to you by your patent attorney or patent agent?
2) Who else holds relevant patents in the same technology or service sector?
3) What is the remaining life of the patent?
4) Has the patent ever been licensed or sold?
5) Has the patent ever been asserted against others?
6) Are there competing technologies or services not covered by the patent?
7) Can a demand curve be generated for the product or service covered by the patent?
8) Which valuation technique should be utilized: cost, market, or income?
9) Has a formal valuation report been generated that can be shared with perspective licensees or buyers?
With well-considered answers to these questions, a fair market value for most patents can be calculated. This process is commonly known as patent valuation, and knowing who the best patent valuation service providers are for any given technology is almost as important as having the patent itself.
Does having this information mean someone will pay the asking price for a license under the patent or for an outright sale thereof? Or will pay a premium for products or services covered by the patent? Of course not. But it does give the rights holder appropriate metrics to work with.
Getting an acceptable price is up to you and/or your counsel through arms-length negotiations. More on that in a future post.