View source for Patent Valuation Methods

= Patent Valuation Methods =

Understanding the value of a patent is essential for licensing, fundraising, litigation, or M&A negotiations. But valuing intellectual property can be tricky—especially if the patent hasn't yet been commercialized.

== Why Patent Valuation Matters ==
* Helps set licensing or sale prices
* Supports investor negotiations or funding rounds
* Assists with accounting, taxation, or insurance
* Provides leverage in IP litigation

== Common Patent Valuation Methods ==

=== 1. Cost-Based Method ===
Estimates how much it would cost to recreate or develop the invention from scratch.

'''Best for:''' Early-stage inventions or internal audits.

Pros:
* Simple to calculate
* Based on tangible expenses

Cons:
* Ignores market potential or competitive value

=== 2. Market-Based Method ===
Looks at prices paid for similar patents in recent transactions or public sales.

'''Best for:''' High-demand tech spaces or patent portfolios with known comparables.

Pros:
* Grounded in real-world pricing
* Transparent when data is available

Cons:
* Hard to find comparable transactions
* Market data may not be public

=== 3. Income-Based Method ===
Estimates the future cash flows a patent could generate, then discounts that back to present value.

'''Best for:''' Patents linked to products already earning revenue.

Pros:
* Considers real business potential
* Flexible and widely used by investors

Cons:
* Requires solid revenue projections
* Sensitive to assumptions

== Additional Methods ==
* '''Option-based valuation''': Treats a patent like a financial option (advanced)
* '''Qualitative scoring''': Evaluates based on technology impact, litigation history, breadth of claims, etc.

== Who Performs Patent Valuations? ==
* IP consultants or valuation firms
* Patent attorneys (for rough estimates)
* Accountants or IP auditors (for tax and compliance)

== Related Articles ==
* [[Should I Use a Patent Broker?]]
* [[How to Sell or License Your Patent]]
* [[Patent Portfolio Strategy]]
* [[How Much Does a Patent Cost?]]

[[Category:Patent Valuation]]
[[Category:Patent Commercialization]]
[[Category:CPC_G06Q30/00]]

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