It is natural for an inventor to want to know the value of his invention, patent application or registered patent. A number of different factors influence that value.
The expert team at our company helps each inventor calculate the value of their inventions and patents according to a range of criteria:
- Assessment of the market size.
- The scale of defense the patent will require – Broad, narrow or specific; patent status; if an application has been filed; if the patent has been examined; if the patent has been granted; the countries in which patent has been applied for; a PCT international patent application, a provisional application; etc.
- Feasibility, physical, theoretical and practical reviews.
- Manufacturing cost and economic viability testing for the patent and the inventions.
- Market size, profit forecasts and business plan.
- Estimate of invention development costs.
- Estimate of design costs.
- Estimate of the cost of manufacturing invention prototypes.
- Estimate of the cost of tools and equipment for the manufacture of the invention.
- Estimate of the costs of manufacturing small or large production series.
- Target markets and market slice.
- National and international standards.
Rights to patents can be sold and traded immediately after the receipt of confirmation that an application for patent has been filed with the competent authority in the target country. The value of a patent that has been examined, granted and received is greater than the value of a patent still subject to the registration or examination processes. Nevertheless, in view of time constraints, companies are also interested in purchasing rights to patents at different stages in the registration and examination processes. When selling the rights to use a patent, transactions can be executed using a range of commercial models. For example:
- One off, sale of all the rights to the patent.
- An initial payment of an agreed sum and receipt of an agreed percentage of the wholesale price for the product as royalties. It is standard practice is to pay 5% to 10% of the wholesale price as royalties, but there are exceptions. A revolutionary patent or product in the medical and scientific fields can receive royalties reaching 15% or more. For example:
According to reports in the media, the American Company Boston Scientific paid the Medinol Company the sum of USD 750 million through a compromise agreement linked to among other things, intellectual copyright and patents for a product in the field of medical equipment.
It is also standard practice to draw up an agreement with the purchaser of the rights to a patent regarding a minimum yearly payment, which will guarantee for inventor and patent holder that the purchaser will indeed take all the action necessary to manufacture and market the invention, product, method, etc.
The inventor or patent holder can also sell the rights to use a patent according to a percentage of the wholesale price for the product, an agreed quantity in each different geographical area and for different periods for one or more purchasers.
Among others, sale of patent agreements usually include a condition stating that the company purchasing the rights to the patent shall finance the costs incurred for the defense of the patent in those geographic areas in which that company operates, on condition that the defense is within the defined legal period.
Usually, the purchaser of patent rights will also be responsible for ensuring the defense of the patent against infringement of patent rights and their defense. Naturally, the value of a patent also depends upon supply and demand in the field of that invention.
To determine the value of a patent, it is possible to assess sales potential based on geographic area, the potential number of users, time frames, etc., multiplied by the expected price per unit.