Determining what your company is worth used to be quite easy. You would simply have to add up everything the company had at that moment, which were usually all tangible assets. Nowadays it’s a bit more complicated to value a brand because they have more and more intangible assets. Like patents. Patent value play a big role in the overall worth of your company.
How do patents add value to a company?
Owning a patent brings you value because the competition can’t own the same patent. Value comes from scarcity, which in the case of intellectual property means owning an idea that other people can’t replicate. So if you were to sell your company, the buyer wouldn’t just get your brand, but also your ideas and your share of the market. Which can be, at times, worth more than the brand itself.
ASML as an example
Think about it like this: if you were able to buy ASML (the company that makes the EUV-machines that can create chips) tomorrow, it would be nice to be able to say that you own ASML. It would be even nicer though, to own their patent and their market share. ASML’s brand equity is largely dependent on their patents. If all the competition knew how to make these machines, the company would lose it’s big share of the market and be worth a lot less.
What determines patent value?
Of course, owning a patent doesn’t mean you own a patent with worth. It needs to be an idea that means something, and that is accepted and bought by the market and perceived as valuable. Putting an exact price on a patent is difficult, because they’re intangible, and there is often a lot of discussion and disagreement on specific worth. There are, however, different aspects that can help determine patent value.
- What does it protect? Patent value is largely determined by what it protects. Does it protect your entire brand, or a specific product or service? If your patent is for an original product this often means more worth than a patent that protects a development process for an existing product. The importance of the product or process that you’ve created also plays a part in the worth of the patent.
- How well is it protected? Patents are a lot of legal work. If the patent isn’t airtight it’ll have loopholes that the competition can use to create their own similar product or process. This diminishes the worth. Whereas strong protection increases patent value.
- Where does your patent reach? Depending on your line of work you may or may not deal with international clientele and competitors. This usually determines whether you decide to go for a national or international patent. International patents add more value than national patents, because your intellectual property will be protected across borders.
- How many potential buyers are there? The size of the market directly relates to profitability of the idea or product behind the patent. If you found a great idea that can be globally marketed, it will add more value than a great idea that can be sold to a niche.
Patent value is a small, but important, part of what makes up your brand equity. Want to know what your brand is worth based on your patents and more? Calculate it here.
