Patent valuation is a complex topic that often leaves patent owners wondering, “What are my patents worth?” Unfortunately, there is no straightforward answer to this question: many factors can impact patent value. In this series of blogs, we will explore the factors that affect the value of patents. This first blog will examine the big-picture trends that impact the values of all patents, including macro-economics, business and technology, legal and regulatory, and geopolitical trends. Subsequent blogs will delve into the specific factors that determine the value of individual patents or patent portfolios.
Following the global financial crisis of 2008, patent intermediaries like our company struggled to sell any patents for two years. Operating companies were facing insolvency or bankruptcy; they needed to conserve cash, making purchasing patents a low priority. Consequently, the sale value of patents plummeted to near zero. However, in the subsequent years of economic growth, there was a rebound in the patent market; companies were again willing to purchase patents to reduce the risk of patent infringement, gain an advantage over competitors, and generate income from patent licensing. Now we are in a period of rising interest rates, many companies will face financial difficulties, resulting we believe in lower demand and pricing for patents.
Business and Technology Trends
The emergence of smartphones and mobile internet services has been the greatest business trend in the past 15 years. Apple, Google/Alphabet, Facebook/Meta, Samsung, Huawei, and other successful companies in this field have generated enormous revenues. And patents in this field have become increasingly valuable. Patents are most in demand when the market for a technology is large and growing. Once the market has saturated, constant product revenues lead to a decline in patent purchases from practicing entities. With fewer companies jostling for market share, there is less need to purchase patents. And after a market starts to decline, it is nearly impossible to sell patents.
Legal and Regulatory Trends
The legal and regulatory environment for patents is continually evolving. Notably in the past two decades, China has implemented a world-class patent system, introducing modern patent laws and hiring and training armies of patent examiners. This has contributed to increasing in patent value worldwide. Major legal changes have also occurred in other countries. In the United States, the Leahy–Smith America Invents Act (AIA) introduced the Inter Partes Review (IPR), which made it easier to invalidate patents, generally reducing their value. In Europe, the current introduction of the Unitary Patent and the Unified Patent Court should increase the value of patents by reducing the cost and complexity of obtaining patent protection in up to 25 countries.
Globalization over the past 50 years has meant that many companies now operate and compete globally, using patents to protect their innovations. However, rising protectionism and an effort to decouple the US economy from the Chinese economy may lead to lower competition, reduced innovation, and ultimately, lower patent values.
In summary, the value of a patent depends on many factors that are continually changing. In this blog, we have described the macro trends that affect a patent’s value, including macro-economics, business, technology, legal, and geopolitical trends. In future blogs, we will explore the value of individual patents in more detail.