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Patent Valuations

Patent Valuations

“How do you determine what a patent is worth?”

This is a common questions investors face, when evaluating a potential acquisition target or investment opportunity. Answering this question with confidence requires a combination of legal, technical, and business expertise. Patent Ingenuity is a law firm that has the expertise in performing patent valuations that meaningfully help various entities (angel investors, VCs, enterprises, etc.) in their due diligence when funding, acquiring, or licensing another entity (startup) with a patent portfolio. 

Patent Valuation Services For Investors

Patent Valuations are a significant component used to determine what a patent portfolio is worth. When it comes to Mergers & Acquisitions, IPOs, Investments, or Strategic Partnerships, knowing the value of a company’s patent and IP portfolio is key. A patent valuation report can help investors mitigate the risk and increase profitability of the transaction. On the flip side, knowing the value of its patent portfolio can also enable a patent holder negotiate better terms for the transaction. When you know how much your software patent is worth, for instance, when seeking series A funding, you can ensure that your IP is valued fairly in the deal.

Patent Valuation Models

The traditional patent valuation model often involves emphasis on the business market perspective, without much thought given to the legal analysis of what is encompassed in a given patent portfolio.  The typical approach is just to assume that if an entity has a patent, then that entity stops all possible infringers -- the patent valuation is then based on a business determination of applicable market share.

By way of contrast, Patent Ingenuity uses a patent valuation model that assess the scope of what is actually encompassed by a patent.  Does the patent really stop all possible competitors from copying a product, or does it only stop a fraction of those competitors?  Using a patent scope model, Patent Ingenuity assess the strengths and weaknesses of a particular patent based on a scoring system.  Further, competitors’ patents are also scored according to that same system.

By getting a thorough patent valuation performed by Patent Ingenuity, the patent acquirer/licensee can better assess what is to be had, and what is not to be had, via an acquisition/license of a patent portfolio, thereby leading to stronger negotiating power.

Patent Valuation Framework

Patent Ingenuity has a unique patent valuation framework that assesses the value of a patent via its scoring model.  The high-level steps of the patent valuation framework are provided below:

Micro-Patent Analysis

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A common question that investors ask when considering funding a company is: “does the company have the patent?”  A better question is: “does the company have a patent, and how strong is it?”

Patent strength matters because it affects what market share a patent owner can hope to obtain via the patent.  If a company has a patent, but it is weak, then an investor may get the impression that the company it is investing in has protected its idea against all competitors. n reality, with a weak patent, no competitors may be prevented from copying the idea.  In other words, the investors may be investing in a company based on a patent that is worthless.

To assess the strength of a patent, or patent portfolio, Patent Ingenuity performs a micro-patent analysis on the patent(s) that is the subject of acquisition, license, or other investment.  The micro-patent analysis is based on a scoring model that scores a particular patent(s) on a scale of 1 to 100.

The patent score essentially relates to the strength of a particular patent(s).  Various factors (scope, patent drafting, detectability, etc.) are compiled and weighted during an extensive analysis of the patent and its file history by Patent Ingenuity. 

As an example, an idea that is patented one way may receive a score of 90 based on it being written in a particular manner, whereas that same idea may have only received a score if it was written in a patent in a different manner. 

Prior to investing in a company’s IPportfolio, the micro-patent analysis provides an investor with a high-level metric in the form of the score – a better patent barometer than the binary question of whether or not there is a patent.

Patent Landscape Analysis

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After determining the score for a particular patent(s) to be invested in, it is also important to determine the landscape of competitors’ patents.  Even if a patent has a high score, competitors may also have patents with high scores for similar technologies. 

Patent Ingenuity develops a patent landscape map of technology areas that potentially fall into the purview of the patentee’s patent, and the strength of competitor’s patents in those areas.

 As illustrated above, the patent landscape map provides investors with a clear high-level picture of what a patentee can protect with its patents in relation to competitor’s patents. 

Market Share Analysis

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Only after completing steps 1 and 2, Patent Ingenuity proceeds to determining the potential market share of a particular patent acquisition/license/investment.  With the knowledge of a particular patent’s strength and the patent landscape, Patent Ingenuity then analyzes what portion of the market share may potentially be obtained via the patent acquisition / license / investment. 

Patent Valuation Report

At completion of its analysis, Patent Ingenuity generates a comprehensive patent valuation report that outlines the micro-patent analysis, patent landscape analysis, and market share analysis.  An investor may then have the comfort level of knowing that due diligence was performed with a deep understanding of the patents involved and how they translate into market share.

Why Hire Patent Ingenuity for Patent Valuation Services?

In contrast with typical patent valuation models that rely solely, or mostly, on business expertise, Patent Ingenuity assigns an experienced patent attorney  to a patent valuation. 

The reality is that reading and understanding a patent is best accomplished through experience in writing patents.  Although many business professionals think they can perform patent valuation by just reading patents, the understanding of what entails a strong or weak patent usually has to be developed through many years of patent preparation – not just by observing from the sidelines. 

That is why many business professionals performing patent valuation tend to jump right to market share analysis, while performing very little, if any, micro-patent analysis or patent landscape analysis.  An investor may then invest in a patent solely on the business potential that may never be realized if the patent itself is weak.

Patent Valuation Expert in Los Angeles, San Francisco, San Jose

At Patent Ingenuity, patent valuation is performed by a patent lawyer who will be able to thoroughly analyze if a patent is strong or weak, and determine market share based on that assessment. With law offices in Los Angeles, San Francisco, and San Jose, Patent Ingenuity has extensive background serving the tech industry. Our technical expertise sets us apart when it comes to writing and evaluating patents in software niches from gaming and mobile apps to fintech and virtual reality. With deep technical and legal experience from Silicon Valley to Silicon Beach, Patent Ingenuity is well poised to handle patent valuations of startups as well as enterprises. Contact us today for a consultation!

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