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Blog | How much is a patent worth? 5 determining factors | EP&C

How-much-is-a-patent-worth-5-determining-factors.jpgIt is interesting to know what your patent is worth for a variety of reasons.

For example:

  1. If you are looking for investors because you need capital to develop your invention or to set up a company.
  2. If want to know how much you can ask for a licence for your invention.
  3. If you want to know how much your business is worth. That will partly depend on your patent (portfolio)
  4. Or if, on the other hand, you are not the patent holder, but are interested in someone else's patent and want to find out what would be a reasonable price to pay for a licence? 

Irrespective of why you want to determine the value of a patent, it is a fact that every patent has its own particular price. This is determined by factors such as:

1. The extent to which the patent contributes to the technical field.

Breakthrough patents that open up entirely new fields of technology, or that are the first to come up with a solution to age-old problems, are the most valuable ones. Examples of these include the patent on the first photocopier, the patent on the first engine-powered vehicle, or - as recently appeared in the news - the patent on the CRIPR-Cas genome editing technology, which can be used to introduce very precise changes to DNA. 

Such patents can give the owner an industry-wide monopoly. They are extremely valuable and can even be worth billions of euros. 

Although the majority of patents are not in this breakthrough category, they are nevertheless valuable because they restrict competition in their technical field. They ensure that you can stay ahead of the competition. 

In order to determine to what extent your invention contributes to the technical field, you can ask yourself the following questions:

  • What are the economic benefits of the invention in terms of quality or efficiency gains, for instance? How decisive is this in the market?
  • Are there any reasonable alternatives for the invention?

2. The size of the market

How many products are sold on the basis of your invention? What is the margin on these products? What kind of sales can be expected, and for what period? 

Another aspect related to this is the number of countries in which the patent applies. After all, the patent is only of value in the countries in which the intellectual property rights are established.

A market analyst can help you answer these questions.

3. The strength of the patent

The strength of a patent depends on the likelihood of the patent standing up in a (hypothetical) court case. The most important question is: how distinctive is the invention vis-à-vis the prior art, i.e. which elements of the technology were already known?

Are there any earlier publications that dispute that novelty or inventive step? Or, are there any strong arguments to support them?

These are questions you patent attorney can answer.

4. The term of the patent

Patents (in principle) have a maximum lifespan of 20 years and therefore potentially offer a 20-year market monopoly. Patents that are still at the beginning of their lifespan therefore still have a longer period to go in this monopoly position and are more valuable.

A patent attorney can tell you the exact lifespan of a patent.

5. Freedom to Operate

A patent does not, by definition, mean that you are free to apply the invention. There may be a broader generic patent belonging to a third party that will stop you from doing so. Consequently, I always recommend that you have a Freedom-To-Operate analysis carried out. A patent attorney can do this for you.

The absence of such broad third-party patent rights will increase the value of your patent.

In short: the value of your patent portfolio depends on various factors. It is definitely not something you can work out on the back of a beer mat. However you can make an estimate on the basis of these 5 indicators. With a bit of extra help, you will be able to work out the value of your patent fairly accurately.