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PATENT VALUATION

THERE IS NO MORE POWERFUL THING, THAN TO KNOW
WHAT YOUR IDEAS ARE REALLY WORTH
Nowadays companies know the asset of each screw in their stock. But often they do not know about what determines one of the largest share of their assets: their patents. The value of a (technical, natural scientific) companies nowadays is determined by up to 84% by intangible assets. These are determined by e.g. patents and utility models. Knowing of your patent portfolio´s value makes your IP strategy strong and your decisions effective and transparent. Here is where we assist you and valuate your patents and utility models.
How do you valuate a patent, how do you determine a patent value?
We valuate your patent, patent family or patent portfolio using different methodolgies, the market approach and the income approach (license analogy). The patent valuation methodologies are certified and mentioned in different norms, guidelines and standards. Typically, the valuation method that will be used depends on the specific patent valuation scope.
What makes a patent valuable?
Some clients ask, if they can influence a patent value and how to do it. Indeed there are strategic decisions that  - apart from the technical quality of an invention - influence the patent value. One is for example the jurisdictions the patent is filed in. Besides the different economy sizes, here the relevance of a certain cuntry for the specific invention is taken into account. 
How much is a patent sell for?
The cost of transactions are typically a mix of fix costs (so called upfront payments) and a percentage of the agreed transaction price that is success based. The pricing model is different among the brokers, of course typically this is also represented in different service that aew deliverd.
Find more insights in our patent valuation Q&A and in our blog "Patent Insider".

Patent Value Ticker

American Express Company $304,24m (-1,82%)

SERVICES

WE UNDERSTAND YOUR NEEDS - FIND YOUR FLEXIBLE PATENT VALUATION SOLUTION DEPENDING ON YOUR GOALS, EXPECTATIONS AND PROJECT SCOPE

AUTO RATING

PATENT VALUATION

A fully automated patent valuation based on 28 different value indicators (hit rate currently> 80%, ie match 8 of 10 values). Recommended for bigger patent portfolios

OPTION RATING
PATENT VALUATION

A manual assessment through up to 76 additional indicators (hit rate is currently at 95%, ie almost all calculated values ​​corresponded to later sales prices​​). Recommended for single patent families or smaller portfolios.

LICENSE ANALOGY
PATENT VALUATION

A manual assessment of patent(s) and inventions based on the license analogy approach (see SIGNO-standard).

All Patent reviews are completed with a comprehensive report. In this report you can find statistical evaluations, various value statements essential findings and certain phenomena that could be found in your individual patent analysis. Ask us for some sample reports, so you can see how complex and extensively informative a patent review can be. Our ratings correspond to existing norms and evaluation standards. Our expert reports also have been accepted by authorities and auditors. Over 17 years of experience, innovative software tools and certified scientific indicator-based methods enable us to evaluate in a short time large patent portfolios - at a very reasonable price with the highest possible quality. We are able to value unlimited, big sized patent portfolios down to single patent families. No matter what the purpose of the valuation will be or if a patent is already in use or not, we will choose the proper approach in order to receive the best results for you.

 

Q&A

 
Q1 - DEFINITION
Q15 - YOUR QUESTION

Do you have more questions? Contact us to ask!

 
Q1. What is patent valuation?

In  general there are 2 meanings for patent valuation:

 

  1. The qualitative (comparing) valuation of patents – here the result is a qualitative score or a direct competitive result patent A is better than patent B or portfolio A has a better technical score than portfolio B. For qualitative valuation in general certain indicators can be used. Simple manual scoring methods for assigning a qualitative score to a patent are widely spread, these are returning an individual and difficult to verify picture of a patent/family/portfolio. Better approaches are automated or semi-automated methods using multiple-choice answers that are more tamper proof and more transparent. The qualitative valuation is limited to internal usage, like benchmarking, RnD controlling or decision-support.
     

  2. The quantitative/monetary valuation. This valuation can more complex, depending of the method used, it also can be combined within indicator models. For the monetary valuation there are different norms and standards available. Using indicator based market analogy valuation approaches delivers a qualitatively as well and monetary value, is reasonable, fast and offers most opportunities for usage like also in accounting, trading, securities and offers a better understanding in benchmarking, RnD Controlling, strategy management.

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Q2. Why does a company need to know the value of its patents?
Valuation offers a huge set of controlling, strategy and marketing instruments. Example: Why not having the potential of measuring the outcome of IP activities and the RnD effect and compare it with competitors? Why not knowing the assets of a company? Why not having a higher company value? Why not benefitting from additional assets in terms of i.e. better creditworthiness? So the correct question is “why not?”

 

Companies with (good) patents have a much higher value than known from their balance as long as their patent value is not activated in the balance. So hiding this value from your shareholders may cause problems.

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Q3. Why should a company know the patent value of other companies?

Today it´s not a secret that companies with high qualitative patents and a strong IP activity have a much better future prognosis compared to those who don‘t innovate that much. It means patent value information is also a powerful instrument for investors to predict the future stock value development of the company.

Knowing the IP value and/or trend of your competitors will also help you to take strategic decisions or to support decisions.

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Q4. What methods do you use for patent valuation?

We have an indicator based market analogy approach in use.

In this approach patents are not directly compared to other patents in terms of the technology, the shares on a product or the market it is addressed to. Each patent is reduced to a set of key figures and indicators, which finally will be compared. The calculated value is based on the reference patterns of patents that were traded in the past. The more indicators can be used, the more precise the model and the value prognosis becomes.

The result is a qualitative and quantitative (monetary) value of a patent, a family or a portfolio.

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Q5. What kind of value is calculated here?
The value is known as “fair-value”, “market value” or “fair market value”. The indicator based market analogy is calculating the value of a patent as if it would be a traded good. This approach is very well known from real estate valuation. The patent value is thereby very close to its market price, because the indicator set (being an abstract model of a patent) is compared to patents that have been traded in the past for a certain price. So the reference data are empirical data and result into a very realistic market value.
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Q6. What is the difference of value and price?
A value is the basis for negotiating a price with a vendor or buyer for a certain good, in this case a patent. The price is what is finally paid and can be the result of negotiation. So value and price do not have to be equal. So the price can be much higher when the individual value (benefit) for a certain buyer is higher than the market value is. Of cause it can also be lower, when a buyer is not willing to pay a certain sum or when a deal consists of additional things (i.e. services, a complete portfolio, licenses).
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Q7. What is the advantage of your approach compared to others?

There is a list of advantages, compared with the other approaches:

 

  • All kinds of patents can be valued

  • „Fair value“ is according to all norms, standards, guidelines, even accounting standards (i.e. IDW S5)

  • Market value is a potential trade value

  • Very low effort to valuate (big automatization potential)

  • Low failure rate (empirical data)

  • Automized patent value data are already available in the market as well as software solutions

  • Approach is a scientific trend

Most of the other valuation approaches that are also mentioned in Norms are not made for patent valuations basically. Some are derived from company valuation (i.e. income approach) or accounting rules (i.e cost approach). This leads to problems in applying these methods to all patents. Also, different approaches may lead to completely different results for the same patent and their application is time-demanding usually. These facts make other approaches less precise and uneconomical compared to the indicator based market analogy approach.

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Q8. How much time does it take to valuate my patent portfolio?

Usually the valuation takes less time than preparing a project, researching and assigning the correct publication numbers by our customers.

The duration is also depending on the scope of valuation that means if it is sufficient to perform a full automated valuation or to add a manual valuation which leads to a much more precise result. And of cause it is depending on the amount of patents we are valuing. In all of our cases in the past the valuation was much faster than our customer expected. Normally we can deliver a first value impression within a day. Our longest project took us 4 weeks including a manual valuation.

 
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Q9. What cost can be expected for patent valuation?

The expected cost depend on patent portfolio size and preferred method (auto rating or option rating). Automated rating will deliver you a good value impression for a very reasonable price. If you need to have a more detailed and more precise value you may choose our manual option rating valuation with up to 72 additional indicators. The valuation result is extremely precise, the cost is very reasonable. Ask us for a quotation.

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Q10. How precise is your patent valuation?

The valuation result ranges from “precise enough” to “100% precise”, depending on the valuation step you choose. Projects where we have been performing both autorating and optionrating never were wrong, this means a later traded price was always in our calculated value-corridor. Please find some valuation examples in the table: see our calculated value for patents/ patents families/ patent portfolios and the price, which was paid later, when it was traded and the results were published.

*) USD- values were recalculated to EURO based the exchange rate for the trade date.

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Q11. What is the difference between quantitative and qualitative valuation?

The quantitative valuation describes a market value of a patent. This is the value that can be derived from transactions that were done in the past (Market analogy principle). The indicator-based patent valuation follows the same principle. It takes a set of electronically available data (and if required also manually rated indicators) into account and this makes it neutral with respect to a vendors or potential buyer’s interest.

 

Qualitative valuation offers an abstract, comparative image of a patent, e.g. in comparison to an average, a benchmark or a competitive patent. The qualitative result of our indicator based method are 6 different key figures- For each of them multiple indicators are used:

  • Market Attractiveness: shows from an IP point of view how many competitors are active and innovations are made in the different technical fields of the company
  • Market Coverage: shows the sizes of the market that is covered with the IP and in how many countries the IP guarantees protection.

  • Technical Quality: shows the degree of innovation that can be derived from a company’s IP

  • Assignee Score: takes the R&D behaviour of the company itself into account that result into IP

  • Legal Score: shows the legal strength of IP in terms of its degree of protecting effect

  • Total IP Quality: is composed by all other key figures above into account stands for a complete qualitative picture.

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Q12. What are the typical evaluation scopes?

Marketing intelligence, Portfolio Management & Monetization

  • Technology benchmarking

  • Competitor monitoring

  • Patent sales/purchases

  • Licensing/cross-licensing agreements

  • IP valuation for funding

  • IP valuation for trial proceedings

  • In-kind contributions to joint ventures

  • Market assessments

  • RnD and IP management controlling & monitoring

Financials

  • M&A purchase price allocation

  • Portfolio valuations for transfer pricing

  • Balancing of intangible assets (IFRS) for reducing interest rate

  • Shareholder interests, stock value

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Q13. What are the typical evaluation customers?
  • Large enterprises and SME in general which intend to evaluate their own or foreign patent portfolios, which plan to acquire or buy/sell a patent portfolio, which grant or take licenses, or want to activate their own IP in the balance sheet as intangible assets.

  • Banks and M&A companies using patents as collateral within the financing-model or within due diligences for the purpose of the sale or acquisition of companies or parts of companies.

  • Private equity, venture and rating companies for the evaluation of companies with patents.

  • Research institutions in order to evaluate the patents for technology transfer activities or spin-offs.

  • Patent attorneys within patent litigation and portfolio optimization.

  • Individual inventors and start-ups with patents - to support the seed- or growth financing.

  • Authorities, who want to know the value of a portfolio, for example, under tax-related issues.

  • Liquidators - for monetizing patents.

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Q14. What makes you unique on the patent valuation market?

We are having a unique valuation approach in use enabling us to calculate a potential transfer value as if a patent would be traded from one owner to another:

  • Information quality: We have the biggest set of indicators in use, this delivers the most reliable results

  • Processing quality: We are having a reference database of traded patents in the past. This enables us to value qualitatively as well as monetarily

  • Data availability: We combine the patent valuation data with business data of a company

  • Expertise: We have deep expertise of more than 17 years performing patent valuation

  • Price-performance and time: Our approach and innovate software solution allows us to evaluate patents very quickly, with best results for reasonable prices.

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