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What are the Different Parameters for Patent Valuation used by Professionals?

Different Parameters for Patent Valuation used by Professionals
Karan Singh
| Updated: Oct 05, 2021 | Category: Patent

For businesses or companies, innovation is the vital means for staying competitive in the marketplace, and the only way to keep that competitive benefit is to safeguard creative or innovative ideas and prevent other companies from using them. Patents allow companies or businesses to keep their idea safe from other users, at least for a time period. Since Patents are assets to companies, it is vital for investors to know how to evaluate a Patent value. However, while Patent licensing or selling patented technology processor design, it is vital to conduct a prior Patents valuation. At the same time, companies or organisations may deploy various methods of Patent valuation. Scroll down to check different parameters for Patent Valuation used by professionals.

What is Patent Valuation?

Before we discuss different parameters for Patent Valuation used by professionals, let’s understand the meaning of Patent Valuation. Patent Valuation is the process or method by which one can evaluate the real market value of a Patent or Patent Portfolio. Investors or companies should perform Patent Valuation while negotiating deals like acquisitions, sales, mergers, or licensing of Patents.

Be it a medium or small scale or large scale enterprise, the process of Patent valuation is vital. Since Patents are precious assets, it makes sense for companies to evaluate their worth and recognise opportunities to monetise them accordingly. As Patent filings will remain competitive & Patent Portfolio Valuation would be central to different business transactions.

Categorised of Parameters for Patent Valuation

For a business or company to evaluate the Patents Value, it requires comparatively examining the market value of its patented innovation. But, this is not the only parameter for finding the Patents value. Following are the two different categories of parameters for Patent Valuation:

  1. Qualitative Parameters for Patent Valuation
  2. Quantitative Parameters for Patent Valuation.

Professionals or experts use these two categories to assess the value of Intellectual Property Assets. While there is no specific approach when using such categories, experts use a combination of both categories to arrive at a comprehensive valuation of patented innovation.

Qualitative Parameters for Patent Valuation

There are five essential qualitative parameters for Patent Valuation as well, which offer a new outlook on Patent Valuation. Experts often rely on such parameters when the qualitative methods prove inconclusive in arriving at a Patent valuation. Following are the qualitative parameters for Patent Valuation:

  1. Hindrances: This qualitative parameter is one of the most vital because it takes into account the buyer’s viewpoint. For instance, if a corporate is looking to buy a Patent portfolio[1], it determines that some of the valuable assets in the Patent portfolio are already licensed to opponents. This implies the buyer can’t use such assets against their competitors. So, the portfolio’s value automatically reduces for that particular buyer. Hence, hindrances might decrease the Patent Portfolio Value.
  2. Patent Validity: Since it usually considers that any provided technology takes ten years to fully mature or develop, a Patent that has a remaining lifespan of ten to twelve years is more valuable. Most Patents have a validity of twenty years; there, such an aged Patent often has a greater Patent premium due to its proven efficacy.
  3. Infringement: Some Patents have better protection than other Patents when it comes to protection against duplication. The Patents that have extensive infringement command a premium & hence are considered to have a higher value as well.
  4. Patent Claim Extent: The Scope of the Patent claim must be right or correct, neither too short nor too extensive. A very extensive claim scope might pose validity problems, and a too short claim scope might create applicability challenges. Therefore, one can inspect the Patent claim scope or the extent to adjust their value accordingly.
  5. Patent Validity Potency: Form the buyer’s point of view, a Patent with questionable or un validity usually has less financial value. A buyer is always looking for Patents that can endure litigation & have a high validity power. The Patent Valuation can be boosted by conducting an invalidity search to assess the Patent strength in terms of validity.

Quantitative Parameters for Patent Valuation

Following are the quantitative parameters for Patent Valuation:

  1. Market Relevancy: For patented inventions that have proven to be useful in present products in the market, the value often rises, which means Patents are victorious and presently applicable in the relevant market have a higher Patent Valuation.
  2. Future CashFlow: The income-based approach that predicts future cash flows that a Patent can bring is also a beneficial parameter for Patent Valuation. It can be said that as data consumption is growing due to increasing penetration of the internet, such Patents value is likely to be high in the future. This calculation is only possible if we consider future cash-flow visions of the Patent.
  3. Size of the Market: This plays an essential role while estimating Patents value based on quantitative parameters. This factor considers the market size of the patented technology. For example, “edge caching” is an essential technology in the content delivery market. As per the current, the global content delivery network market size is likely to increase. Hence, the Patent Value relevant to this technology can be significantly affected by its market growth & size.
  4. Technology Adoption: Another one of the most vital parameters for Patent Valuation is to consider the present stage of the provided technology. For a technology or tech that is still in its emerging stages, professionals may often arrive at a lower valuation of Patents in comparison to the ones that have matured. But, it differs from market to market, and hence, the Patent valuation shall be carefully adjusted.
  5. Geographical location: The geographical coverage of the relevant Patent family to consider during Patent Valuation. The Patent’s value may alter depending upon their geographical location, i.e., whether it comes under the USPTO (United States Patent and Trademark Office), the EPO (European Patent Office), and any other jurisdiction. Hence, the size of the market can be deemed in terms of such geographies.


After discussing essential parameters for Patent Valuation, it is concluded that businesses are adopting different strategies to make the process effective because there is no such particular industry-standard method that all professionals generally use. However, an expert strategic partner can optimise the whole process based on its years of expertise in handling such instances.

Read our article:What are the Steps to Follow During Patent Portfolio Audit?

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Karan Singh

A legal writing enthusiast, a wanderer, and a zealous reader. After gaining a lot of knowledge about the diverse legal topics and developing research skills, Karan joined the league of legal content writers to deliver quality-rich blogs.

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