When talking about patent valuation, each may have a certain understanding of valuation and value of a patent. This article should clean up with the most often experienced mistakes when inventors or patent owners perform their own patent valuation. This article shows the most frequent mistakes that were done with respect to the general understanding of a value, the scope of valuation and why a value is not necessarily also a price in the end. 1. Mixing up value and price A value of a certain good is something that can be determined by applying different methods, like the market analogy, the cost approach or the income approach. But the price is depending on what a buyer is finally willing to
Today, the major part of the value of a company - on average over 80% - consists of intangible assets. Patents are among the "most tangibles among the intangibles": they can be borrowed, sold, licensed, for example. Companies use them to protect innovations from imitation and as a strategic instrument to keep competitors out of the market or to ensure a strategic balance of power.
Accordingly, patents also allow a deep insight into the R&D activities of companies and reveal much about the planned future and potential capabilities. However, this requires a quality measurement or, even better, a value assessment in order to obtain reliable information. The sustainability efforts of companies can also be supported, substantiated or questioned with patent value analyses.
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