If you have a patent, you must know how much it is worth. There are several ways to value a patent, including the calculated value, market, and income methods. Other methods include the probability adjusted income method, Monte Carlo analysis, and real options. The cost method, based on discounted cash flow, is often used to value a patent. A calculation of the value of a patent will help you decide whether or not it is worth the cost.
Cost of filing a patent application
Many people think that filing a patent application is relatively inexpensive and easy. However, the actual process is more complicated than you might think. Recent patents in the field have a lot of text and illustrations, and they can be nearly incomprehensible to people who aren’t familiar with patent law. Even if you have no idea what you’re doing, you’re likely to need the services of a patent attorney.
Depending on the complexity of your invention and the number of patent claims, attorneys’ fees can range from $3,000 to $15,000 for a single patent application. In addition to filing fees, there are post-filing costs. As a general rule, you should budget approximately $5,000 to $7,500 for prosecution and issue fees. In most cases, you’ll receive one to three rejections which are:
#1. Rejection §102 (not novel)
Patents that are not unique in their field of invention will fail the novelty test. Resulting to examiner issuing a rejection letter.
under 35 U.S.C. § 102 an application can be rejected. if prior art reference matches every element in a patent application’s claims.
#2. rejection §103 (Obvious)
Patenting a machine or process that is already simple for others to discover on their own is not permitted.
35 U.S.C. § 103 requires that a patentable invention be a non-obvious improvement on prior art. This section states that the examiner rejects an invention as it is obvious.
#3. Rejection §112b (no clear description)
Before submitting a patent application to the USPTO, patent professionals must confirm that their claims are not unclear or ambiguous. Ideally, the specification should support all terms in the claims by serving a glossary so that patent examiners as well as the public can easily determine their meanings.
Properly drafted patent applications will help you avoid Section 112 (b) rejections
Before deciding how much to spend on patent filing, you’ll need to consider your goals. If you want your idea to be the next big thing, you should think about your product thoroughly and draft a business plan and do market research. After all of these preparations have been made, you’ll be in a better position to make a decision about whether to proceed with the patent application. Alternatively, if you’d like to save money on patent searching, you can conduct it yourself.
As you can see, filing a patent application can be expensive, but it’s definitely worth it. The fees vary widely between companies and patent attorneys. A minimally complex invention will cost you about $1,250. While a moderately complex invention might cost $1,750 to $2,500, a relatively complex invention may cost you as much as $3,000. Moreover, if your invention is software-related, your costs could go up to $5,000 or $10,000.
After filing an application, the patent office will publish a notice stating whether or not it is granted. If it does, you’ll be sent a Notice of Allowance and Fee(s) Due by your patent attorney. The fees listed in this notice are for the patent issuing and publication of the patent application. The patent will last for 20 years, after which you must pay periodic maintenance fees to maintain the patent.
Cost of maintaining a patent
The cost of maintaining a patent increases as its term extends. There are three main periods that need to be paid, with the first occurring on the first anniversary of the grant of the patent. The USPTO requires patent owners to pay maintenance fee at 3.5, 7.5 and 11.5 years after the date of the original patent application.
Maintenance fees increase as patent families grow, so it is important to plan ahead for them. A patent family can have multiple patents relating back to one original application. If there are many pending patents, the maintenance fee will be higher, especially if you have a large portfolio of pending patents. However, if you have a smaller patent portfolio, you may want to consider letting it lapse without paying maintenance fees.
Maintenance fees will vary based on the number of countries your patent covers. In the US, the first maintenance fee can range between $400 and $1600. In China, however, the fees are only $150 or $200 depending on the size of the business. This is because large corporations pay higher fees than small entrepreneurs. Further, the fees are also based on the number of patents. You will have to pay maintenance fees for each patent that is renewed after a certain period of time.
It is important to determine the value of the invention. It is not a good business idea to get a patent for an invention that does not yield a satisfactory return. Patents are intangible assets and it can be difficult to assign them a monetary value. The economic-analysis method is the most popular method for patent-valuation which has three approaches: cost, income, and market.
#1. Income Approach based on cash flows
Valuing a patent based on cash flows is a common way to value a patented product. The cash flows from patents can be based on net revenues, litigation wins, and related products sales. When evaluating the cash flows from a patent, the market environment must be considered. If a patent is not generating expected revenues for a specific time period, then it may not be worth much.
The income approach estimates the future cash flows from a patent. This method considers the present replacement cost of the product or service compared to the cost of producing a duplicate or acquiring an equivalent asset. While it can be correct in some cases, an income approach is based on the future cash flows that will come from a patent. These benefits will be credited to the patent and may include increased sales or cost savings.
Another factor to consider is the time needed to obtain the patent. Cash flow should be calculated for every quarter of the ten-year period, including patent fees. However, this cost can be spread out over three years, allowing the patent to be granted. So, the total cost to obtain a patent is the same if the costs are spread out over three years. For this reason, Cash Flow and Time to Patent should be balanced.
#2. Cost Approach
The cost approach determines the value of intellectual property asset by calculating its cost compared to a similar or exact intellectual property asset. This method is especially useful when an patent asset can easily be reproduced or when it is difficult to quantify the economic benefits. This method doesn’t account for lost costs and does not consider unique or unusual characteristics of the asset.
#3. Market Approach
The market approach uses a comparison of the actual price paid to transfer rights to similar intellectual property assets under comparable circumstances. This method is simple and based upon market information. It is used often to determine approximate values for royalty rates, tax, inputs, and income methods.
Benefits of owning a patent
Owning a patent allows an inventor to profit from their creativity. The invention must be patentable subject matter in order to be protected. However, a patent is much more than just a document for a future business. There are numerous benefits to owning a patent, including a lifetime right to your invention. Listed below are a few of the more notable benefits.
Among the benefits of owning a patent are the rights it confers upon the creator. Patents grant the creator exclusive rights over their creations for a certain period of time after they have been granted. Since the inventor must disclose his invention to receive a patent, the cost of searching for others to sell or use it is greatly reduced. Moreover, patents boost innovation by encouraging the development of innovative ideas and products.
Patents are considered the best method for transferring knowledge. In addition to supporting economic growth, patents encourage innovation and knowledge sharing. Additionally, the patent system can act as a catalyst for a robust exchange of technological information. By granting exclusivity to a creator of an invention, it also protects them from competition and ensures no patent infringement. Thus, it is crucial to establish a strong patent portfolio in order to attract funding.