When it comes to licensing or selling a patent it is important to know its estimated value. My question is how someone can find appropriate method/methods for patent valuation ? I know there is many approaches but it seemed very complicated. Is there a way to know as an indivudual to learn his/her patents values ?


A patent, like anything else that is to be sold is only worth what someone else is willing to pay for it. A patent on a drug that sells a billion dollars of product a year is worth a lot. A patent on a slight improvement on a niche product might have little value. You have to analyze the economic value of the product stream enabled by the patent to understand its value. I don’t know of any simple method for doing this.


You can spend 10's of thousands of dollars having management consulting firms try to generate models of the patent's values under various assumptions. Since the life of a patent (in the US) is 20 years, they will try to generate assumed revenue streams over those 20 years and then discount them to present day dollars (if you can earn interest on today's dollars received in the future, then the inverse must be true and dollars you might receive in the future, in terms of their worth today, must be discounted in a similar manner). The assumed revenue streams would probably be based on changes in market share and supply/demand curves. The problem with the approach is that it is one assumption built on top of another. A court of law might entertain these valuations but how much weight a prospect licensee must on them is another question.

My answer to this question has been to find a sales guy (who takes a 10% commission) and pits potential licensees against one another. My assumption is that I would do better, notwithstanding that commission, with a sales guy than on my own.

In the end, a patent is valued by what someone is willing to pay for it.

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