Just how do you figure out how much a patent is worth? Valuation of a patent portfolio may be useful when, among other things, an entity desires to:
- determine whether to pursue a patent application;
- evaluate a company's value (e.g., for merger, acquisition, or stock price); or
- estimate damages.
The value of a patent can depend on a multitude of factors including but not limited to:
- breadth of a patent claim;
- scope of the patent claim given up during prosecution;
- validity of the patent given changes in patent laws;
- price customers would be willing to pay for a product embodying the claimed invention;
- license fees paid for similarly important components;
- costs to substitute the claimed technology with an alternative.
Often, the value of a patent is not publicly known because parties often settle matters out of court. Other times, the value of a patent becomes abundantly clear after a blockbuster court case. For example, a jury recently awarded nearly $1.7 billion to Johnson & Johnson, whose patent the jury determined was infringed by Abbott Laboratories' drug, Humira. Abbott Labs plans to appeal the verdict.
What's even more interesting is that a patent can be worth nothing to one party and worth quite a bit to another party. I have seen companies overpay for patents where they desperately need the patent as leverage against a competitor. In that case, the patent is worth a lot to that particular company, but much less to another third party.
There are also situations where a company will overpay for a patent to "complete" their portfolio and have an airtight lock on a technology.
But I think what it boils down to is that a patent is worth whatever you can get someone else to pay for it. Simple, but true.
