Patent Use or Intended Use is a Key Determinative of Value

Fernando Torres of IPMetrics states, “A patent’s use is a key arbiter of its economic value,” in a fascinating, ordinal ranking of potential uses of a patent and their corresponding relative values to an organization. The list is instructive to valuation analysts as they locate and classify an organization’s intellectual property, and to planners and managers who are exploring alternatives.

Here’s the order of Patent Uses ranked by relative value:

  1. Cross licensing:  organizations exchange rights to patent portfolios to facilitate their own growth and protect from infringement claims;
  2. Internal: a patent is used within the organization, for example for a process improvement. This is the most common use of a patent;
  3. Blocking:  The patent is used to “block” competitors from exploiting a particular technology.  Some refer to this as defensive use of a patent;
  4. Mixed licensing: Mixed licensing is a collaboration strategy, as a patent owner benefits from mass adoption of its technology;
  5. Licensing:  The goal is to identify and develop revenue streams directly from the IPR;
  6. Sleeping:  Sometimes patents are held for some future, unknown use.  It’s not difficult to see why these are the least valuable.