Valuing a patent
Discussion
Im asking the question on behalf of a friend. His business uses a one man band inventor for a particular process at least twice a month. The invention used is innovative and has a patent that has 13 years left to run. The inventor has offered to sell my friend the patent as he is looking to retire and there is huge potential to take the patent and then franchise the sale and use of the machine it protects to individual companies in the UK, and potentially abroad. I am being deliberately vague on this as you understajd but the question is.....
How do you value a patent to agree a fair price? are there specialists out there that specialise in this kind of thing?
How do you value a patent to agree a fair price? are there specialists out there that specialise in this kind of thing?
Yes, most patent attorneys can do this, there are plenty of us on PH! I'm in-house so can't give legal advice to unconnected 3rd parties, but there are plenty here who can.
In the main, attorneys look at the validity of the patent in terms of how easily (or otherwise) it was granted, as well as carrying out a search to see what else is (and was) out there. Then they'll look at infringement, ie what the patent claims, and if there is restrictive language which can easily be circumvented by others. That indicates the strength of protection, which in itself is meaningless if you have no means to enforce those rights against others. If it is restricted it may be that, morals aside, the effect may be reproduced at a reasonable cost, without needing to refer to the patent, which often gives either a strong negotiating position, or no need to use it. They can also look at what's being sold compared to the rights the patent gives, often there's a mis-match, particularly with small businesses, where the patent granted might only protect one or a few features of something, or indeed in practice or with experience it might be necessary to do additional things, or even completely different ones.
Don't forget patents are territorial rights, which means if the owner only has a GB patent in force, it is highly unlikely you'd be able to take action against anyone using / selling etc the same elsewhere.
In the main, attorneys look at the validity of the patent in terms of how easily (or otherwise) it was granted, as well as carrying out a search to see what else is (and was) out there. Then they'll look at infringement, ie what the patent claims, and if there is restrictive language which can easily be circumvented by others. That indicates the strength of protection, which in itself is meaningless if you have no means to enforce those rights against others. If it is restricted it may be that, morals aside, the effect may be reproduced at a reasonable cost, without needing to refer to the patent, which often gives either a strong negotiating position, or no need to use it. They can also look at what's being sold compared to the rights the patent gives, often there's a mis-match, particularly with small businesses, where the patent granted might only protect one or a few features of something, or indeed in practice or with experience it might be necessary to do additional things, or even completely different ones.
Don't forget patents are territorial rights, which means if the owner only has a GB patent in force, it is highly unlikely you'd be able to take action against anyone using / selling etc the same elsewhere.
The other thing to consider is that a patent is only really worth it if you are prepared to defend it in court. Up until that point, it is generally untested and unproven in terms of value.
In this case, I would be considering 2 things:
1) If the current owner of the patent would defend infringement today?
2) Does the proposed new owner have the stomach (finances) to defend it after purchase.
If the answer to either of these is no, then a different route might make the best business sense.....
Bob
In this case, I would be considering 2 things:
1) If the current owner of the patent would defend infringement today?
2) Does the proposed new owner have the stomach (finances) to defend it after purchase.
If the answer to either of these is no, then a different route might make the best business sense.....
Bob
Croutons said:
Yes, most patent attorneys can do this, there are plenty of us on PH! I'm in-house so can't give legal advice to unconnected 3rd parties, but there are plenty here who can.
In the main, attorneys look at the validity of the patent in terms of how easily (or otherwise) it was granted, as well as carrying out a search to see what else is (and was) out there. Then they'll look at infringement, ie what the patent claims, and if there is restrictive language which can easily be circumvented by others. That indicates the strength of protection, which in itself is meaningless if you have no means to enforce those rights against others. If it is restricted it may be that, morals aside, the effect may be reproduced at a reasonable cost, without needing to refer to the patent, which often gives either a strong negotiating position, or no need to use it. They can also look at what's being sold compared to the rights the patent gives, often there's a mis-match, particularly with small businesses, where the patent granted might only protect one or a few features of something, or indeed in practice or with experience it might be necessary to do additional things, or even completely different ones.
Don't forget patents are territorial rights, which means if the owner only has a GB patent in force, it is highly unlikely you'd be able to take action against anyone using / selling etc the same elsewhere.
This patent attorney wouldn't touch valuation questions. Maybe you in-house bods do, but I doubt those of us in private practice are able.In the main, attorneys look at the validity of the patent in terms of how easily (or otherwise) it was granted, as well as carrying out a search to see what else is (and was) out there. Then they'll look at infringement, ie what the patent claims, and if there is restrictive language which can easily be circumvented by others. That indicates the strength of protection, which in itself is meaningless if you have no means to enforce those rights against others. If it is restricted it may be that, morals aside, the effect may be reproduced at a reasonable cost, without needing to refer to the patent, which often gives either a strong negotiating position, or no need to use it. They can also look at what's being sold compared to the rights the patent gives, often there's a mis-match, particularly with small businesses, where the patent granted might only protect one or a few features of something, or indeed in practice or with experience it might be necessary to do additional things, or even completely different ones.
Don't forget patents are territorial rights, which means if the owner only has a GB patent in force, it is highly unlikely you'd be able to take action against anyone using / selling etc the same elsewhere.
Is this not quite a simple calculation?
What is the annual saving to the business that owning the patent will bring?
What is the potential revenue of selling the process to others who may already deal with the inventor?
What profit do you wish to make from owning the patent?
What payback period are you looking for?
What is the risk (in cost terms) of somebody infringing the patent?
Does this not give the value to the business? What the patent owner actually wants may be based on different facts so the values may be poles apart, but I think the value to the business needs to be established first then make an offer.
What is the annual saving to the business that owning the patent will bring?
What is the potential revenue of selling the process to others who may already deal with the inventor?
What profit do you wish to make from owning the patent?
What payback period are you looking for?
What is the risk (in cost terms) of somebody infringing the patent?
Does this not give the value to the business? What the patent owner actually wants may be based on different facts so the values may be poles apart, but I think the value to the business needs to be established first then make an offer.
What is it? How much does it save? What is the mark up? What is the volume?
If it's been patented it is already in the public domain.
We patent products, but don't patent in house processes as
1 other people don't get to see them
2 unlike a product it is very difficult to demonstrate someone is using it unless you can see their internal processes
Maybe a licensing / commission agreement will be better route?
Price is whatever both people are happy with!
If it's been patented it is already in the public domain.
We patent products, but don't patent in house processes as
1 other people don't get to see them
2 unlike a product it is very difficult to demonstrate someone is using it unless you can see their internal processes
Maybe a licensing / commission agreement will be better route?
Price is whatever both people are happy with!
craigjm said:
OK so how do you suggest that we come to a figure as to what it might be worth?
Perfectly reasonable question, and I think the answer is "it depends". A patent by itself is worthless. It is what you do with it that matters. If you think that you can make money out of it by licensing it to other, that is great, but the value of the patent then depends on what the licence fees are (minus renewal fees and legal fees for the licence). So, if a patent is bring in licence income, then you can value it based on that income. If you only think that you can licence it, then it is guesswork, and the patent is worth what someone will pay. If you are the only interested party, then I suggest that puts you in a strong position.
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