An Augmented Market Approach to Patent Portfolio Valuation
Intellectual Asset Management, Issue 79, September/October 2016
5 Pages Posted: 24 May 2017 Last revised: 11 Dec 2017
Date Written: August 21, 2016
Demand is increasing for quick, easy and relatively reliable methods of patent portfolio valuation in patent-intensive corporate transactions. An augmented market approach may be the solution.
The augmented market approach to patent portfolio valuation saves a great deal of time without sacrificing a significant amount of accuracy. It is a three-step process which consists of:
1) Comparable transaction valuation based on per patent prices calculated from three different sets of comparable transaction samples which are controlled for size, technology area or industry sector, and size and technology or industry at issue; 2) Econometric model valuation based on econometric valuation models developed from actual transactions of patent portfolios, which usually require the following data items as major inputs: i) number of patents and patent applications; ii) patent ranking, litigation status, blocking patents or SEPs; iii) tech fields and buyer or seller organisation type; and iv) sellers financial status, licensing-back and brokerage involvement; and 3) Valuation determination based on the valuations concluded from the comparable transactions and the econometric valuation models, further adjusting for factors specific to the seller, the buyer and the subject portfolio.
Keywords: Market Approach, Relative Valuation, Patent Market, Transaction Price, Comparable Transactions, Econometric Valuation Model, Patent Portfolio Valuation, Augmented Market Approach, Market Dynamics
JEL Classification: O32, O34, C13
Suggested Citation: Suggested Citation