How Do You Value a Patent: Everything You Need to Know
A patent is defined as the right to exclusively grant permission to reuse or repurpose an invention or idea for a set duration.4 min read
You may be wondering how do you value a patent. A patent is defined as the right to exclusively grant permission to reuse or repurpose an invention or idea for a set duration. A patent is valuable because it specifically prohibits other people from remaking, reusing, or selling the patented product or concept for as long as a person owns the patent.
Understanding What Subject Criterion Is
As it relates to a patent, a subject criterion is a distinction that determines whether an idea can be patented. For instance, a subject criterion states that ideas or inventions cannot be patented if they fall within the following categories:
- Cannot be within the laws of nature
- Cannot be a natural phenomenon
- Cannot be an abstract or broad idea
Additionally, this requirement says that all patents must be in the categories of machinery, processing methods, or a man-made product to be patentable.
Understanding What Invention Criterion Is
Another requirement from the U.S. Patent and Trademark Office (USPTO) for an idea to be patentable is that it must be a completely new, or unknown, invention or idea. In other words, the public cannot have previously seen this same invention in the past and it must have no previous patent applications submitted with the same concept.
Understanding What Description Criterion Is
The USPTO has another requirement for an idea or invention to receive a patent. That mandate is that the inventor must effectively describe and outline the invention and all relevant ideas in such a way that any ordinary person, outside that specific industry, can understand the invention and all described elements with ease.
What are the Different Types of Patents Available
There are three different types of patents for which an inventor can apply. These different types of patents include:
- The plant patent: This patent is given to an invention that has discovered or created a completely unique type of plant.
- The utility patent: This type of patent is given to inventions that create a completely different process, software application, machine, or a new way to improve or modify a previously patented idea or invention.
- The design patent: This patent type is used to protect the design of an invention as it relates to its appearance, shape, or ornamental design.
Why It’s Important to Know the Value of a Patent
Businesses must consider the value of their patent when organizing their financial books because a patent can be considered a valuable asset to a company. The value of a patent can become especially important if your business is involved in a merger, being acquired, dissolving, or facing bankruptcy or infringement issues.
How to Value a Patent
If you are trying to determine the value of a patent, there are three simple steps you can use to help.
- You need to first measure the quality of the invention that is covered by the patent. You can quickly determine the quality of a patent by assessing how often that patent is cited in other patents. This is referenced as “prior art” in other patent applications and if your patent is often used in other applications, it can be considered a quality patent.
- You then need to evaluate whether the patent is solid or constructed well.
- Finally, you must determine how to monetize your patent. A patent is only worth what other people are willing to pay for it or to license it.
What Can You Learn About Patents from Large Companies?
You can learn a lot by following what successful companies do well. One thing that you’ll see across many successful businesses is their understanding of how valuable trademarks and patents are to the financial health of their organization. These intangible assets play a large role in developing competitive edges and increasing their position within a market. If these companies are protecting their current patents and trademarks while continuously innovating and applying for new patents, you can surmise that patents are valuable to the growth and sustainability of a company.
What is the Value of Your Patent?
Determining the value of your patent is not simple. In fact, there are an average of one million patents issued every decade by the USPTO. Many of these patents are not that valuable, while some can be worth a lot.
A breakthrough or completely innovative patent can generate huge returns. Take inventions like Edison’s light bulb or the first printer, these were inventions that had never been created before and the patent on those items are almost priceless.
Because patents are so difficult to value, it’s recommended that you use lawyers or advisers with relevant experience and technical skills in your space to help appraise your patent. To ensure the correct valuation of a patent, you should not try to value it on your own.
If you need help with determining the value of a patent, you can post your legal needs on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.