If you have a patent, you must know how much it is worth. There are several ways to value a patent, including the calculated value, market, and income methods. The cost method, based on discounted cash flow, is often used to value a patent. A calculation of the value of a patent will help you decide whether or not it is worth the cost.
Businesses know that innovation is key to staying competitive in the marketplace. To do this, you must protect your innovative ideas and stop other companies from using them. Patents allow businesses to protect their ideas from others, at least for a limited time. Patents are assets to companies Investors need to be able to calculate the patent’s value and make an account of it.
Cost of filing a patent application
Many people think that filing a patent application is relatively inexpensive and easy. However, the actual process is more complicated than you might think. Recent patents in the field have a lot of text and illustrations, and they can be nearly incomprehensible to people who aren’t familiar with patent law. If you have no idea what you’re doing, you’re likely to need the services of a patent attorney.
In most cases, during examination process you’ll receive one to three rejections which are:
#1. Rejection §102 (not novel)
Patents that are not unique in their field of invention will fail the novelty test. Resulting to examiner issuing a rejection letter.
Under 35 U.S.C. § 102 an application can be rejected. if prior art reference matches every element in a patent application’s claims. The disclosure must include all elements required by the claim within its broadest possible interpretation to reject the claim. See MPEP Section 2114 subsections II and IV.
“A claim can only be anticipated if every element set forth in it is found in one prior art reference. Verdegaal Bros. v. Union Oil Co. of California, 814 F.2d 628, 631, 2 USPQ2d 1051, 1053 (Fed. Cir. 1987). ” A claim that covers multiple structures or compositions is considered to be anticipatory if none of these structures or compositions are known in the prior art.
In particular, AIA 35 U.S.C. 102(a), provides that:
A patent is not granted to any person unless –
- (1) The claimed invention was published, described in a printed publication or made available for sale or other purposes to the public prior to the effective filing date;
- (2) The claimed invention was described under Section 151 or in an application or patent publication published or deemed published under Section 122(b). In these cases, the patent or application names another inventor and is effective filed before the invention’s effective filing date.
#2. rejection §103 (Obvious)
Patenting a machine or process that is already simple for others to discover on their own is not permitted. 35 U.S.C. § 103 requires that a patentable invention be a non-obvious improvement on prior art. This section states that the examiner rejects an invention as it is obvious.
The non-obviousness requirement to patentability is still set forth in AIA 35 U.S.C.103. However, there are some significant changes to pre-AIA 35 U.S.C.103.
The biggest difference between the AIA 35 U.S.C. 103 and pre-AIA 35 U.S.C. 103 is the AIA 35 U.S.C. 103 determines obviousness at the effective filing date of the claimed invention, but not the time the claimed invention was filed. Pre-AIA examination practices dictate that the Office uses the effective date as a proxy date for the invention date, unless evidence is available to support an earlier date.
#3. Rejection §112b (no clear description)
Before submitting a patent application to the USPTO, patent professionals must confirm that their claims are not unclear or ambiguous. Ideally, the specification should support all terms in the claims by serving a glossary so that patent examiners as well as the public can easily determine their meanings.
Properly drafted patent applications will help you avoid Section 112 (b) rejections
Before deciding how much to spend on patent filing, you’ll need to consider your goals. If you want your idea to be the next big thing, you should think about your product thoroughly and draft a business plan and do market research. After all of these preparations have been made, you’ll be in a better position to make a decision about whether to proceed with the patent application. Alternatively, if you’d like to save money on patent searching, you can conduct it yourself.
As you can see, filing a patent application can be expensive, but it’s definitely worth it. The fees vary widely between companies and patent attorneys. A minimally complex invention will cost you about $1,250. While a moderately complex invention might cost $1,750 to $2,500, a relatively complex invention may cost you as much as $3,000. Moreover, if your invention is software-related, your costs could go up to $5,000 or $10,000.
After filing an application, the patent office will publish a notice stating whether or not it is granted. If it does, you’ll be sent a Notice of Allowance and Fee(s) Due. The fees listed in this notice are for the patent issuing and publication of the patent application. The patent will last for 20 years, after which you must pay periodic maintenance fees to maintain the patent.
Cost of maintaining a patent
The cost of maintaining a patent increases as its term extends. There are three main periods that need to be paid, with the first occurring on the first anniversary of the grant of the patent. The USPTO requires patent owners to pay maintenance fee at 3.5, 7.5 and 11.5 years after the date of the original patent application.
Maintenance fees increase as patent families grow, so it is important to plan ahead for them. A patent family can have multiple patents relating back to one original application. If there are many pending patents, the maintenance fee will be higher, especially if you have a large portfolio of pending patents. However, if you have a smaller patent portfolio, you may want to consider letting it lapse without paying maintenance fees.
Maintenance fees will vary based on the number of countries your patent covers. In the US, the first maintenance fee can range between $400 and $1600. In China, however, the fees are only $150 or $200 depending on the size of the business. This is because large corporations pay higher fees than small entrepreneurs. Further, the fees are also based on the number of patents. You will have to pay maintenance fees for each patent that is renewed after a certain period of time.
patent Valuation
It is important to determine the value of the invention. It is not a good business idea to get a patent for an invention that does not yield a satisfactory return. Patents are intangible assets and it can be difficult to assign them a monetary value. The economic-analysis method is the most popular method for patent-valuation which has three approaches: cost, income, and market.
#1. Income Approach based on cash flows
Valuing a patent based on cash flows is a common way to value a patented product. The cash flows from patents can be based on net revenues, litigation wins, and related products sales. When evaluating the cash flows from a patent, the market environment must be considered. If a patent is not generating expected revenues for a specific time period, then it may not be worth much.
The income approach estimates the future cash flows from a patent. This method considers the present replacement cost of the product or service compared to the cost of producing a duplicate or acquiring an equivalent asset. While it can be correct in some cases, an income approach is based on the future cash flows that will come from a patent. These benefits will be credited to the patent and may include increased sales or cost savings.
Another factor to consider is the time needed to obtain the patent. Cash flow should be calculated for every quarter of the ten-year period, including patent fees. However, this cost can be spread out over three years, allowing the patent to be granted. So, the total cost to obtain a patent is the same if the costs are spread out over three years. For this reason, Cash Flow and Time to Patent should be balanced.
#2. Cost Approach
The cost approach determines the value of intellectual property asset by calculating its cost compared to a similar or exact intellectual property asset. This method is especially useful when an patent asset can easily be reproduced or when it is difficult to quantify the economic benefits. This method doesn’t account for lost costs and does not consider unique or unusual characteristics of the asset.
#3. Market Approach
The market approach uses a comparison of the actual price paid to transfer rights to similar intellectual property assets under comparable circumstances. This method is simple and based upon market information. It is used often to determine approximate values for royalty rates, tax, inputs, and income methods.
Benefits of owning a patent
Owning a patent allows an inventor to profit from their creativity. The invention must be patentable subject matter in order to be protected. However, a patent is much more than just a document for a future business. There are numerous benefits to owning a patent, including a lifetime right to your invention. Listed below are a few of the more notable benefits.
Among the benefits of owning a patent are the rights it confers upon the creator. Patents grant the creator exclusive rights over their creations for a certain period of time after they have been granted. Since the inventor must disclose his invention to receive a patent, the cost of searching for others to sell or use it is greatly reduced. Moreover, patents boost innovation by encouraging the development of innovative ideas and products.
Patents are considered the best method for transferring knowledge. In addition to supporting economic growth, patents encourage innovation and knowledge sharing. Additionally, the patent system can act as a catalyst for a robust exchange of technological information. By granting exclusivity to a creator of an invention, it also protects them from competition and ensures no patent infringement. Thus, it is crucial to establish a strong patent portfolio in order to attract funding.
Patent Monitization
One of the main reasons to get a patent is to make money from it. Anyone with a large patent portfolio will know that it is common to monetize patents. These patents may be monetized in a variety of ways. As a Patent holder/assignee you may license your patents, sell them or turn them into products.
Patent monetization Is important in defining the value and scope of an invention. It is a waste to your time and resources if your ideas and inventions don’t generate revenue. It is crucial to create a realistic, comprehensive and achievable patent monetization strategy from the very beginning.
There are many options available and patent owners can choose any of these methods to monetize their patents. Other parties can also make revenue by purchasing high-potential patents and enforcing those against suspected infringers to receive higher royalties. These parties are sometimes called patent assertion entities or patent trolls. Although it is a valid business model, it has been criticized and ridiculed in recent years. Whether you believe it or not, they are great for the economy and for innovation.
A common error that investors do is failure to understand the value of your patent prior to entering into any license negotiations or litigation. This could result in licensing a core patent asset at a lower market rate, or worse, invalidating the patent assets.
conclusion
A patent application grants you a priority date to your invention. If there are two patent applications for the same invention, one with the earlier priority will be granted the patent.
Patent monetization can be a complicated and multi-faceted process with many potential pitfalls. A well-executed strategy for patent monetization can not only lead to increased revenue, but also help companies understand how patent portfolios can be used to support their business goals.
You can save money by doing the patent search and filing the patent application. This will ensure that you have enough time to get a patent.
