Knowing how much a patent is worth is helpful when planning how much to invest in developing your patent portfolio. Unfortunately, the value of each patent depends on many things, for example, the field, the quality of the description (specification), the claim scope, etc. However, there are a few generalities that give us an idea of how much a patent may be worth.
The economic-analysis valuation method is frequently used by businesses to calculate the value of their patents. The method considers the replacement cost, the income being generated by each patent, and the market value of a comparable patent.
However, the sale of patents are usually between private parties that have no reason to disclose the purchase price. That makes it difficult to tell the "market value" of patents. Headline settlements in patent litigation have exceeded a billion dollars per dispute, but that is obviously not typical of patent valuations.
The company IPOfferings publishes a yearly summary of patent valuations based on the sale of patents outside of litigation. The 2014 report, for example, includes the sale price of over 2,800 patents. Based on the IPOfferings report, the average purchase price for a patent was about $225,000 in 2013 and $250,000 in 2014.
Benefits to IPOs
There is additional value for companies planning an Initial Public Offering (IPO). Diego Useche has published several articles on the impact of patents on the success of IPOs. In a 2012 study, Useche found merely applying for patents correlated to an increase in the median value of money collected at an IPO by $1.09 million (€0.83 million). In the same study, an allowed application (patent pending) was correlated to an increase in the median value of money collected by an additional $1.17 million (€ 0.90 million). An additional patent obtained prior to IPO is associated with an additional $1.83 million (€ 1.41 million).
Even if your business is not contemplating an IPO, take note that successful companies continually invest in their patent portfolios. Microsoft, Qualcomm, and Google each received more than 10 patents per working day in 2014. Using IPOfferings' calculation of the value of an average patent, these companies added over two million dollars a day in company assets by investing in patents.
The stability of companies can also be improved by investing in a patent portfolio. Iain Cockburn has published articles on the impact of patents on the viability of start-up software companies. Cockburn found that simply applying for one or more patents lowers the probability of failure by almost 5%. In addition, start-up firms with more patent applications than their peers had a 10% lower risk of termination by merger or acquisition.
Invest in your portfolio
The return on your investment in a patent portfolio may depend on the type of business you operate. High-technology companies invest heavily in research and development. For example, in 2014 the Tufts Center for the Study of Drug Development estimates the cost to develop and win marketing approval for a new drug is $2.6 Billion. Companies in these fields may find developing a strong patent portfolio prudent protection for their hard-earned innovations. Regardless of the size or age of your company, investment in a patent portfolio could be a valuable approach to growing and protecting your business.