A 5-Step Guide Towards Selling Your Patent

 One of the most important steps in the innovation process is the grant of a patent since it gives the creator many new options. First, it grants the inventor ownership of the innovation, preventing the idea from being stolen. Then, it grants the inventor the only authority to use it. And as a result, it acknowledges the persistent effort an inventor put forth over the course of several months or perhaps years to build something that had never existed before.

Owning a patent, however, is only the first step; the most important thing is how one may make use of this protected innovation. Although the method of use may differ from one inventor to the next (depending on personal preference), one can either sell or licence the underlying invention to others or market a product based on it.

Step 1: Determine whether the product is marketable.

The likelihood of selling the patent increases with the ease with which the invention can be turned into a product. Determining the commercial applicability of the patented invention is thus the first step in effectively selling a patent or a patent portfolio. In this case, we must evaluate two things:

the simplicity of producing a product based on the patented invention.

Second, how economically feasible is the entire production process? For instance, whether or not the product is in demand on the market.

Finding any current product or business process that violates the patent in any way is one of the greatest ways to evaluate these two factors. It serves as a glaring demonstration of the invention or patents in the portfolio's high commercial applicability. Sagacious IP conducts infringement analysis to make this determination. This study aids in locating the market participants who are violating the relevant patent. It suggests that they are carrying out a procedure that falls under the purview of the patent. The patent is therefore extremely pertinent to the market.

Once the violation and its type have been determined, we can build our selling story around it and present our offer in a more favourable light.

It can be crucial to maintain attention on the most crucial patents in the set when the portfolio contains a diverse range of patents. We at Sagacious IP use a multi-phase curated process to identify the deal drivers, which are patents with any known infringement or ones that address a pressing issue that is now pervasive in the relevant market sectors. Such patents have the potential to propel a lucrative patent sale.

In addition to the aforementioned, we also pinpoint the enablers or enabling patents within the patent portfolio. Similar to the deal-driving inventions, these patents are founded on the same fundamental idea. They do, however, reveal certain additional elements of the technologies that deal-makers do not. Infringement of these aspects may happen frequently in the future. As a result, the enablers and deal-driving patents can be carefully combined to present the potential buyer with a compelling argument.

Furthermore, knowing the underlying technology and its characteristics aids in identifying all potential market sectors where a patent or patent portfolio may be applicable. By doing this, they widen the patent's potential uses in new, uncharted directions.

The second step is to assess the fair market value.

The second step is to assess the patent and establish its fair market value after we have proven that it has broad market applicability. The evaluation is a crucial step in the process since it keeps the inventor or seller informed about the value of their patent. As a result, it leads to better choices and keeps the seller in a strong position during discussions.

1. A market-based strategy - In this method, data for similar patent transfers are examined to determine an estimated value. Although it is a simple procedure, relying only on it is not the best course of action to determine a fair value. Due to the fact that the final value of a patent in a given transaction depends on a variety of factors, including the dynamics between the parties involved and the value of a patent's violation, among others. These elements are very unique to a contract, and they each have a different impact on the value of a patent. Such transaction data is moreover not easily accessible. As a result, the information is obscure and falls short of its intended use.

2. Cost-based Approach - This alternative method involves evaluating the overall cost of producing a patent that is similar to the one being valued. This method takes into account the price of R&D, the cost of obtaining and maintaining a patent, and other related factors. However, this is once more not a trustworthy assessment on its own because it only takes into account cost-related components of evaluation and ignores a number of market and IP-related factors. As a result, it disregards elements like the portfolio's ability to deter infringement, the anticipated revenue it can bring in, and the uniqueness and applicability of the underlying technology.

3. An approach based on income - According to this method, the value of a patent or patent portfolio is determined by how much money they could potentially generate. This strategy takes into account the components that profit from patent users. It takes into account variables like the remaining life of the patent or portfolio, the potential revenue it can produce when it is turned into a product, etc. However, this strategy is also not particularly thorough. For this reason, at Sagacious IP, we essentially use a Hybrid Approach to ascertain the patent's fair market value.

The most thorough of the aforementioned ways is the hybrid approach, which integrates many procedures. It is composed of two sections—Quantitative and Qualitative—and aids the seller in arriving at a calculated and fair patent value.

The Quantitative Analysis makes up the first component of this hybrid method. It entails analysing the market for the technology under study, predicting the amount of income that would be made from using the technology under study, determining if the technology is new or outdated in the market, the discount rate, etc.

To determine an expected value, numerous additional market-influencing aspects are also taken into account. Here are some of them:

1. Total Addressable Market (TAM): If a product or service wins a market share of 100% with no rivals, it can cover the whole market.

2. Market Coverage: This element takes into account whether or not the target technology is already available on the market. If so, information about the patent technology's market position, rivals, etc., is also gathered.

3. Market/Industry Size: This looks at the size of the industry or the market that the patented technology is applicable to. To arrive at a more accurate patent value, it also considers the industry's potential for future growth.

The most crucial component of the hybrid approach is its second component, the qualitative analysis. It entails a careful examination of the intellectual property research.

Despite receiving a predicted result from the quantitative analysis, the evaluation is made even more reliable by the qualitative analysis' second component. Furthermore, it would be wise to examine these criteria in order to comprehend the true value of the Intellectual Property because the applicability of the patent depends on a number of variables.

This section takes into account more than 15 different variables. Based on the relative relevance of each, a distinct weight is given to it.

Here are a few of these important factors that should be given more weight:

1. Market Applicability: This factor addresses how the invention can be used in the market and directly affects or drives the patent's overall valuation. As previously noted, we conduct an Infringement Analysis to evaluate the situation.

2. Rivalries: This element evaluates the extent of competition that the patented technology may experience. It consists of two stages: Crowdedness, which refers to the amount of competition, and Competitiveness, which refers to the quality of competition. Market penetration is gauged by the degree of crowding. The barriers to market entrance are probably going to be low, high, or moderate when taking into account the current products that the new concept, product, or invention will compete with. In light of the existing products that the new invention/idea/product will compete with (including price, quality, etc.), competitiveness is a measure of quality; the invention/idea/product will likely be seen as inferior or superior with additional benefits.

3. Patent life: The remaining patent life as at the moment the contract is reached is taken into consideration in this element. The purchaser learns the duration of their right to use the patent through this information. For instance, someone purchasing a patent would need to understand how long he would be able to prevent others from utilising or replicating the idea. A patent that is about to expire might not be worth as much as one that has ten years left in it. Therefore, a key factor in the buying strategy is the patent life.

4. Basis for Allowance: The basis for an allowance may have been a more general or more specific technical idea. For instance, a patent that was granted on a broad notion, like making a group video conference, would be worth more than one that was granted on a specific idea, like muting or unmuting a group video call participant. And a patent that claimed a method to plan a group video call amongst participants would be valued differently from the same.

The foundation upon which the patent has been awarded is the reason for allowance. It suggests that the patent's claims should be sufficiently broad to allow for the successful application of the patent. In order to ascertain the coverage, the examination of the patent prosecution history is done. The value of a patent increases with the scope of the concept it covers. Additionally, it has the potential to significantly alter the portfolio's value.

5. Consumer's need: This aspect takes the needs or characteristics of the buyer into account. Depending on the buyer's ultimate goal, the value of a patent or portfolio truly fluctuates from one bidder to the next. Determining the current value of the patents in the context of the unique circumstances with the purchasers becomes crucial for the seller. It is important to consider the potential uses for these patents in the future and to estimate their value both now and in the future.

For instance, the value of a patent or portfolio would significantly reduce for the buyer if they were purchasing it to prepare a defence against competitors who were already subject to encumbrances because they would be unable to use the patents to protect themselves from these competitors. The impact can be so great that the buyer decides against purchasing these patents at all.

6. Encumbrances: This section determines if the underlying patent portfolio is currently subject to any encumbrances. A patent licencing agreement, for instance, is an encumbrance because it precludes a business from collecting royalties from a business that has previously licenced a patent. This may restrict the patent's scope of use and consequently lessen its value.

Finding potential purchasers is the third step.

It's time to find the potential purchasers after determining the greatest price for our patent. In the third phase, we look for the parties who might be interested in the patent's core technology. There are a few ways to do this, which are explained below.

Finding the market participants who are violating the patent in any way is the simplest method once a probable infringement has been detected. Such infringers become our main audience to whom we present the offer and provide them two choices. To prevent infringement, they can either purchase or licence the patent or change their procedure. Legal action may be used as a warning if the infringement is unwilling to accept one of the two options.

If there are no violations, the other method is to identify the players who are having similar issues. These are the participants in the relevant industry who can gain from the technology covered by the patent. This is accomplished through researching businesses in the relevant industry to learn about their operations and difficulties. Once located, the proprietary technology can be used to inform them of the answer to their issue. This will increase the likelihood that the patent will sell for a fair price, ultimately leading to a win-win situation for both the seller and the buyer.

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