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Valuing Patents: Why They are Worth More Than You Think

Businesses need to remain competitive in their respective industries, and one of the ways for them to do that is by protecting their innovative ideas, especially from competitors. Patents are a means of providing protection for business ideas. For a certain period, patented ideas are kept for the company’s own development and use. No other companies can use these ideas when it has been already patented. In most cases, patents are considered as company assets and investors need to know more about calculating a patent’s value.

A patent is similar to a title. It provides someone — an individual or a company — the exclusive right to an idea for its invention or development for a certain period of time. With a patent, others are not allowed to make, use, or sell the item for the length of the patent. After the patent is given to an inventor, they will have all legal authority to forbid others from producing or marketing the invention where this patent was awarded.

Types of Patent

There are three basic types of patent: the utility, plant, and design.

  • Plant Patents – This type of patent is usually given by the government to a discoverer who has invented or discovered a new plant variety. It lasts for 20 years, starting from the date it was filed. It prohibits others from using or selling the plant.
  • Utility Patent – This type of patent is granted to investors who discovered or invented a new or useful process, a machinery or software, or have a new functional transformation on a present invention. Utility patents also last for 20 years from the date it was filed.
  • Design Patent – This patent serves as protection over an invention’s design, improved shape, or appearance. This type of patent is only for products that already exist and are being improved in function and style. The patent is good for 14 years starting from the date it is given.

The Value of a Patent

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Businesses need to record the patent’s value in their books because it is considered as an asset. This is important, especially to businesses involved in acquisition and mergers, infringement analysis, dissolution, as well as bankruptcy.

An important factor in valuing a patent is to get the worth of the invention. It will not be a good business intent to get a patent for something that does not have any suitable return to the inventor. Keep in mind that patents are considered as intangible assets, so it can be challenging to estimate a monetary value for it. One way to come up with its value is to seek assistance from business valuation advisors.

Business valuation experts and professionals may use any economic analysis methods in determining the real value of a patent. The success of the company will be determined with the valuation of its assets including the patents that they are granted. This is important for both business owners and inventors so that they stay on top of their competitors.