Three factors that make a patent valuable

Bruce Rubinger, of Global Prior Art, Inc., writing in IAM Magazine, beseeched patent managers to understand what makes patents valuable before setting out on a monetization quest. The concepts are equally useful to valuators.

According to Rubinger, most patent owners operate in a crowded IP space, wherein patent strength depends upon novelty, broad claim coverage, and commercial viability.

Novelty is less obvious than one would think. A patent should not be obtainable if the innovation isn’t novel. However, as Rubinger points out, there is a significant difference between the patentability search authorities conduct and “invalidity search” competitors or potential licensees will conduct. With technology companies, for example, a party solicited to license a patent may well conduct its own, exhaustive “invalidity search” for prior art showing that the concept was known before the effective date. The suggestion is to ensure novelty the patent owner should conduct its own invalidity search.

A valid patent may have little commercial value if the claims are narrow. Any potential licensee will research to determine if the patent “reads against its product or process.” The broader the claims, the more likely they will impact the target client.

The best innovation in a commercially unviable space has little value. For valuation analysts, the importance of assessing the market factors cannot be overstated.

Rubinger recommends IP owners conduct an annual audit of their holdings in order to confirm IP departments are creating, maintaining and exploiting “strong patents covering critical technologies.”