Entities sometimes need to determine what a patent or a portfolio of patents is worth. Valuation of a 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; and
- 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 yesterday 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.
Valuing a patent can thus require the skills of someone who understands both legal as well as business issues, or at least an interdisciplinary approach.