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Patents, like other forms of Intellectual property (IP), are assets with monetary value, similar to any tangible assets such as real estate. As with any other asset, a patent evaluation must consider countless legal, economical and technological issues.
Currently there are four common methods/approaches to evaluating patents. In this article we will briefly discuss each method/approach and how to conduct it.
In using the “cost method” we will try to establish what would be the cost of replacing the evaluated patent with other solutions for example developing and patenting of a similar technology, in the same countries the evaluated patent is in force.
Establishing the development cost can be very complicated, but patenting costs is more straightforward – A status search of the evaluated patent, gives a clear picture of where and when the patent was filed and granted. Based on that information a patent attorney/agent can give a reasonable estimation of filing and maintenance fee costs.
Through using this method, we will try to answer one main question: What are the prices of comparable and similarly “strong” patents that were recently purchased/sold.
The information regarding sales transactions is often confidential but using business research methods can give in many cases, a good idea of the price range. Getting information regarding the evaluated patents “strength” is much simpler – conducting an Intellectual Property (IP) Due Diligence search.
It is worth mentioning that in the case of a patent that protects a new innovative and revolutionary product/technology there is no way to base a comparison.
The Income method is quite straightforward – Checking the potential future cash income generated from the patent evaluation minus the costs of purchase and maintenance.
This is done by assessing factors such as:
Many business practices are used in order to determine these factors (market analysis, sales projections, business intelligence, branding research etc.). As mentioned above patent maintenance fee costs can be easily established based upon a patent status search.
As can be understood from the title, this approach takes into account non-monetary aspects (such as legal status, technological assessment etc.) but it does encompass many of the economical /commercial issues discussed in the previous methods.
Here are some of the main aspects and questions researched using this approach (some of them are nearly identical but assessed from a different angle):
4.1. Legal aspects
Just like every other asset a patent has clear legal boundaries. When conducting a patent evaluation, it is advisable to first conduct a thorough status search to answer questions such as:
Other important legal issues to check (usually through state of the art, invalidity and freedom to operate searches) are:
4.2. Business/commercial/financial aspects
These aspects include among others –
The way to establish most of the above lay mainly in the business field (Market analysis, sales projections, business intelligence etc.), however some major questions can be answered only by an Intellectual Property (IP) Due Diligence search and a Patent Landscape Report (PLR).
4.3.Technological aspects
These aspects include among others –
The questions arising from these aspects can also be answered by a Patent Landscape Report (PLR), an Intellectual Property (IP) Due Diligence search or by state of the art, invalidity and freedom to operate searches.
Evaluating a patent is a difficult, complicated, and intricate process, involving complex patent analysis with softwares from many different angles and disciplines. The first step should always be a sound, comprehensive and professional search.