chapter  4
8 Pages

Patent Portfolio Thermodynamics

One way patents are measured is by their “value.” Sometimes a technology business or individuals (e.g., investors) need to know what a patent is actually worth, such as when the patent is offered for sale or for licensing. Accountants and bankers have come up with all kinds of schemes for valuing patents. These schemes all share a common feature: uncertainty. The process of valuing a patent is inherently uncertain because a patent’s value depends on many factors. For example, it can be difficult to know how easily a patent might be avoided (i.e., designed around) or whether there is invalidating prior art, which if found could reduce the value of the patent to zero rather quickly. It is also difficult to know whether the patent has other flaws that could undermine whatever its value appears to be on the surface.