how to calculate value of patent [Glossary]

Last updated : Aug 5, 2022

How do I determine the value of a patent?

Conventionally, patent valuation can be performed using three main approaches – market approach, income approach, and cost approach. In the income approach, the value of a patent will be the current value of cash flow or cost savings that it will provide.

What is patent formula?

If it involves an inventive step and is useful to trade or agriculture it can be patented. A patent for a scientific formula, however, will not be granted. Treatments and formulas cannot be patented. What about a patented formula for medication? Many pills are patented, but not the formulas, rather the end products.

How much should I sell my patent for?

If the corporation makes an offer, it will typically be anywhere from $50 thousand to $8 million, and can be higher. On the other hand, an inventor trying to simply market an issued patent to corporations, is likely to get anywhere from $5,000 to $35,000.

Are patents worth money?

In some industries, patents are absolutely critical. But in far more they are not. It's a well-known fact that a vast majority of patents are worthless. Around 97% of all patents never recoup the cost of filing them.

What patent makes the most money?

The patent for the telephone is often considered to be the most valuable patent in history.

What are the 3 types of patents?

What kind of patent do you need? There are three types of patents - Utility, Design, and Plant. Utility patents may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or compositions of matters, or any new useful improvement thereof.

How much does a patent cost?

A patent attorney will usually charge between $8,000 and $10,000 for a patent application, but the cost can be higher. In most cases, you should budget between $15,000 and $20,000 to complete the patenting process for your invention. Previous: Why should you file a patent application?

What are the 5 requirements of a patent?

• The innovation is patentable subject matter. Patentable.
• The innovation is new (called 'novelty')
• The innovation is inventive.
• The innovation is useful (called 'utility')
• The innovation must not have prior use.

How much do you get paid for a patent?

A patent which grants ownership of an invention, but it won't pay you. There are a few ways you can generate a profit from your idea. A patent is an important document which grants ownership to an invention. However, simply owning a patent won't generate a dime for the inventor.

Who will buy my patent?

• Free Marketplaces. Patent Mall. PatentAuction.com.
• Paid Marketplaces. Yet2.com. IAM Market.
• Patent Brokerage Marketplaces. ICAP Patent Brokerage. IP Trader.
• Programs for Patent Owners. Marathon Patent Group.

What percentage of patents make money?

Analysts report that more than 95% of patents are worthless-- not because patents as a class are worthless, but because companies fail to understand one simple principle that makes patents powerful. To understand, it is helpful to take a step back and first consider the differences between strong and weak patents.

How do I sell a patent?

To sell a patent, the patent holder must determine the quality of the underlying invention outlined in the patent. A patent is a vital doc that grants possession to an invention. To gain revenue out of your concept, you will need to promote the patent, license utilization rights, or market the product yourself.

How much is a patent portfolio worth?

Prices range from about US$130,000 per property to nearly ten times that. And these prices are for “valuable” patent portfolios. Equally enlightening is the calculated average US patent value of US$78,000.

Who is the patent king?

Shunpei Yamazaki — The Guinness Book of World Records currently names Shunpei as having more patents than any other person. He has been granted 2,591 United States utility patents and has 9,700 worldwide patents, which is cumulative of more than 40 years of inventions.

Can you make money off patents?

It is possible to make money from patents, but it typically involves an agreement with a third party. These agreements require careful drafting and should clearly identify the patent rights concerned. These agreements should be registered with the relevant authorities to increase their legal benefit.

How much does a 20 year patent cost?

The full cost of obtaining and maintaining a U.S. patent over 20 years is in the range of $20,000 to $60,000. This sum is influenced by the type of technology being patented; the number of claims and drawings included in the application; the number and nature of rejections from USPTO; filing fees, etc.

How long is a patent good for?

Patent protection is granted for a limited period, generally 20 years from the filing date of the application. Is a patent valid in every country? Patents are territorial rights.

Is patent an asset?

A patent is considered an intangible asset; this is because a patent does not have physical substance, and provides long-term value to the owning entity. As such, the accounting for a patent is the same as for any other intangible fixed asset, which is: Initial recordation.

Why are patents so expensive?

Because patents are valuable to have and expensive to infringe there will always be those who seek to get around your rights. The job of the patent attorney is to make sure that doesn't happen to the greatest extent possible. That requires a lot of time and energy, which translates into money.

What is poor man's patent?

A poor man's patent is essentially writing out a description of your invention and then mailing that written description to yourself. This postmarked envelope supposedly acts to create the date of your invention as the date this written description was postmarked.

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okay well welcome everyone today our session will be on ip valuation uh we'll be talking about patent valuation methods and some of the practical considerations of those different models before we get started next slide please a couple administrative items we will be recording today's session and if you've registered you will get a email later on with the link to the recording in case you want to look at this later on or share that short share the recording with any of your colleagues during today's session if you do have any questions please type them into the q a box which on my screen is at the very bottom of the zoom window it may be on the top of yours and we'll try to take those questions real time or if not we'll address them at the end of the presentation and finally don't forget to follow us on linkedin and for more information about other web uh webinars check out our website at slwip.com next slide please we're very lucky today to have three great panelists um i'm your moderator i'm sorry i'm your host doug portnow and i'm a patent attorney at the schweigman law firm and just uh for sake of uh not in terms of importance but in terms of the order of pictures we have uh kent richardson who's a partner at the richardson oliver law group and kent is a published attorney who is actively involved in a lot of buying selling and acquisition of intellectual property assets we are also very fortunate to have today suzanne harrison who's principal and founder of the recipients firm which is an ip strategy firm and also the author of edison in the boardroom which is a strategy book and finally we also have mark stignani who is a patent attorney at the schweigen firm and in charge of the analytics department as well as the firm's compliance officer so with that i'm going to turn this over to kent and let you take it from there all right let me skip ahead a few slides here to the first one um all right so we're going to talk a little bit about what patent valuation is and patent value as an example uh why you should care about this and then some best practices and some you know things that work better and things that don't work better so next slide all right let's talk a little bit about value versus evaluation all right next slide um so suzanne why don't you actually talk a little about value versus valuation because this is this concept actually we don't learn it as lawyers um and it's an important you know value evaluation and price so once you start up with this yeah so i mean all of us talk about getting value from something or from our intellectual property what is the value of our patent for example and value is um a point in time estimate right and it can be both qualitative and quantitative right i mean the worst case scenario is when someone says how much do you love your mother um like 4.2 that that makes no sense right i love her a lot that's that's just enough and that's a qualitative view um and we also think of a value as contextual right so we talk about value to the owner or value to the investor or value to the the buyer all of those have different value estimates as it were evaluation is a way to prioritize where to focus attention and resources and it always looks into the future and it's based on a set of assumptions and that those assumptions can be assumptions about time and what you want to do with it and who the target is and all of those things and so valuation is putting all of those assumptions together over time to give you a value estimate which is that point in time number next slide so you know honestly why does valuation matter i mean we use it a lot right um and internally within corporations it can drive investment from both what you want to in your internal resources if you want to look for external sources of revenue or investment it's about driving r d investment in decisions it's about choosing what products and revenue you're going to have and it can also help as we said before it can prioritize and be a proxy for importance level can't you want to add to that yeah so i mean stepping back a little bit there's a couple things that are really important about this you know what you're doing is you're creating a an evaluation actually you know everybody focuses on the end number right that's like oh what's the number actually there's a whole process that that's important in the valuation and that process is building agreement among the stakeholders on how we're going to go about making a business decision right how we're going to say something is valuable or not valuable or how we're going to assign value to that um and and it isn't just the last number right so i think that's an important element there's a it is an ongoing process that gets you to a number but what you have done is you build consensus around a decision-making process that you can explain to somebody and six months from now you can still explain to them like this is how we came up with the answer to what we thought the value was and that's an important distinction here it's not just the number i also think just building on that that um you know one of the interesting things about intellectual property management is that it takes three different functional areas right it takes legal r d and business and not all of those groups make decisions the same way and so you're creating a set of decision rules for how to get more consistent decisions over time right because ideally valuation is only one you don't do it once you know in certain instances you do but usually you're doing it over time do we want to invest in more things in r d that happens all the time you want more consistent decisions about that in addition to being accurate yeah if i could add to that i think there's a there's also a uh harmonization going on you're trying to get a common language going between a finance the group a marketing group an engineering group and a legal council not to mention the tax department because one of the things that you know as we mentioned valuation is a continuum or an estimate of yield if you will across a particular set of assets uh whereas you know evaluation if you're going into a transfer pricing there's a number there but it's uh as the previous slide mentioned it's very much an eye of the beholder because what is valuable in an assertion uh and the value of an insert asserted asset versus the value of something you're using to you know transfer royalties around the world is incredibly different and gives you uh it gives you an entirely different perspective when you're talking to your internal uh stakeholders as well as external companies or external governmental authorities as you're discussing these points with them so you know that that brings up two points on that context that i want to re-emphasize that i'm going to give you a very simple example imagine you have a pile of gold in front of you right there's a pile of gold you know immediate reaction for most people is well that's valuable now imagine that pile of gold is in the middle of the desert your car is broken down you have no communication systems and nobody knows where

Thanks for your comment Windy Normandin, have a nice day.
- Rodolfo Covotta, Staff Member

in this video we're going to explore another of the many methods you can use to value a patent another method of valuing patents particularly if you have a large number of patents to value is the macroeconomic method in the macroeconomic method you assume that a certain portion of the country's GDP like maybe a third is attributable to patents and then you divide that number by a total number of patents that are still issued and valid and then that gives you a number yeah so if in the case of assuming five trillion dollars for the value of patents in the economy and 2.4 million patents it gives every patent a value of 2.1 million dollars now this has some really obvious flaws because certainly some patents are worth a lot and other patents worth little but this method values them all about the same on the other hand it is useful if you want to justify evaluation for a large number of patents without actually going through them all you'd be surprised at how often this kind of number a roughly 2 million dollar valuation shows up for a patent so another method that has some serious drawbacks but is often useful I'm Scott Thorp a registered patent attorney and if you'd like more information on valuing patents please visit our website

Thanks GigottiU your participation is very much appreciated
- Rodolfo Covotta

About the author

Rodolfo Covotta

I've studied stochastic process at Loyola University New Orleans in New Orleans and I am an expert in quantum chemistry. I usually feel sad. My previous job was radio & tv program director I held this position for 20 years, I love talking about pet sitting and yoga. Huge fan of Tory Lanez I practice canoeing and collect books and periodicals.