How much is your patent worth?
14 Aug 2025
Introduction
You have spent manhours cracking your heads, invested heavily in R&D, often going back to the drawing board before you have finally arrived at your invention. At the end of the day, you finally question yourself if it was worth the effort and time. How much is your patent worth?
Patent Valuation: Methods, Challenges, and Strategic Considerations
It is important to conduct patent valuation especially for monetization, strategic investment considerations and even tax purposes. Patent valuation is also critical during litigation and M&A. While it may be less complex to valuate tangible assets such as property, a patent, being an intangible asset, may be more complex as its monetary worth is dependent on its relative strength, market demand, and technological relevance. In this article, we will explore some methodologies, key factors, and practical challenges faced in patent valuation.
When is Patent Valuation Important?
If you wish to license your invention, it is important to have your patent valued to give you an indication of the potential royalty fees. During M&A transactions, an entire IP portfolio should be valued prior to any acquisitions. Being an intangible asset, your patents may still be considered as an asset and may be used as collateral by banks and institutions for disbursement of loans. Further, for tax and accounting purposes, it would be beneficial to have the valuation of your IP ready. Moreover, while not that common, in the event that a third party infringes your patent, in the determination of damages during litigation, your patent should be valued in the calculation of reasonable royalties or lost profits.
Methods
How is a patent valued? There are a number of valuation firms who specialize in patent valuation. Typically, some of the valuation methods include:-
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Cost-based approach
Under the Cost-based approach, this method considers the cost to re-create or replace your patent, e.g., expenses incurred in R&D, filing costs, annuities. Etc.
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Market-based approach
This method compares similar related transactions (eg., sold or licensed patents)
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Income-based approach
This is the most widely used method which considers the contribution of your patent to past, present or future profits, e.g., from licensing, sales.
While the above broadly sets out some valuation methods, there are also other factors that will affect or influence the value of a Patent.
Factors Affecting the Value of a Patent
The strength of a patent is one of the key factors that may influence the value of a patent. The strength of a patent is determined by the scope of the claims. In general, a claim scope that is well-drafted and broader in scope may attain a higher value. Other factors that may affect a strength of a patent include the prosecution history of the application and the enforceability of the patent. This could be determined by the litigation history and whether there has been any opposition or challenges to the validity of the patent.
Current market demand also plays an important factor in patent valuation. There may be industries that face a higher demand (such as AI, biotechnology), and such patents may achieve higher valuation.
Other factors that may affect the valuation of a patent include the family tree of the patent. If you have more patents filed overseas, this would also raise the value of the patent. The lifespan of your patent also plays a key role, as a longer lifespan of the patent generally indicates a greater licensing potential.
Practical Considerations
As a patent proprietor, some practical considerations include having well drafted claims that are broader and enforceable. Engaging an experienced Patent Attorney who understand your invention and needs is important. Consideration of filing patent applications overseas and hence building a large portfolio tend to attract buyers and deter litigation. It is also encouraged to monitor industry trends and to align your patents with emerging technologies.