Why Intellectual Property valuation may not be right for your company?

 

You've built up a portfolio of patents to safeguard your invention, but do you realize how much they're worth to the world? Do you understand why you should be concerned? There are a variety of instances in which valuation is necessary, including mergers and acquisitions, licensing intellectual property rights, financing, and legal proceedings. Intellectual Property valuation is also essential for any firm making long-term strategic choices about its business.

IP valuations may take place in a variety of ways, including quantitative and/or qualitative methods. The quantitative method takes into account the economic worth of the intellectual property, while the qualitative approach focuses on examining the uses and legal strengths of the intellectual property.

When determining the economic worth of one's intellectual property, the first four quantitative methodologies are used. Cost, market, income, or option-based valuations of intellectual property valuation all assume that you will be able to license your IP and/or that you will be able to assign a real physical value to it, including the cost to replace and develop it.

Typically, a qualitative valuation approach relies on valuing intellectual property, such as identifying its significance, or what is known as its "patent score." This strategy focuses on the legal elements of the invention, such as the technological degree of the innovation, market specifics, and the structure of the firm.

When using this technique, some basic things to consider are: How would you characterize IP innovation in relation to the relative state of the art? Is the patent towards the end of its life cycle or just beginning? What's more crucial is to determine where this patent fits into the market, as well as how much of it controls.

Qualitative & Quantitative Methods:

Both qualitative and quantitative methods have their advantages and disadvantages, but the most significant disadvantage is that they do not indicate how effectively a patent protects the value proposition of the firm. Patents are treated as though they were just intended to protect technology, and the commercial logic is often overlooked in the process.

Multi-Innovation Strategy:

The Multi-Innovation strategy begins by addressing a critical question: How does this patent protect your company?

That protects your company? is a crucial question we rarely ask. So often do we get focused with patenting individual designs or technology that we lose sight of the overall picture. When determining the value of intellectual property, it is crucial to answer this issue since it offers the required context for the valuation to be relevant. 

For us to determine whether a certain patent is effective in protecting a firm, we must assess the broader value proposition that the technology in question is addressing. What is the entire scope of the commercial opportunity? How many other solutions are there that are tackling the same problem? How simple would it be to go around this specific concept while yet competing in the same marketplace?

Starting with a clear idea of the entire use case and how protectable it genuinely is, the multi-Innovation method to valuation may be implemented. Following that, the patent strategy is developed in accordance with the available information. A strategic "moat" is intended to be built around the business opportunity for the company value potential to increase exponentially — literally due to the strength of the intellectual property.

By strategically using intellectual property valuation, a corporation may make it impossible for others to be successful in the same field without being forced to participate in their profits in certain way. This implies that a well-protected firm may realize the rewards of its rivals' successes rather than using significant resources attempting to drive them out of the market.