What Is A Patent Worth?

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.

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