IP owners frequently ask for a “back of the envelope” assessment of patent value—a grey appraisal area for many reasons. “On the surface, this sounds like a reasonable request,” writes Fernando Torres, chief economist at IPmetrics. “A specialist should be able to review and consider the issued patent document and determine an approximate market value.” However, the analyst may need to remind the owner that a patent’s economic value does not arise from the attributes of the innovation itself: “Its value is derived from its current role in the economy. The invention itself may have scientific, engineering, or even artistic merits,” Torres writes, “but these are not sufficient attributes to determine economic value.”
In his article, “Fundamental Principles of Patent Value,” Torres discusses the two essential drivers of patent value and reminds appraisers (and business owners) when patents may actually represent a net cost. Torres’s article led off the inaugural issue of IP Management & Valuation (IPMV)(Jan. 2012), the new publication devoted entirely to the identification, evaluation, protection and growth of IP assets. To sample IPMV, go to our free downloads page, where we’ve just posted Torres’s complete article.