Pricing and valuating a Patent

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Patents are intellectual property (IP) that may need to be appraised for accounting, tax, litigation and transactional purposes in situations that include divorce or bankruptcy actions, estate settlements, sales of businesses and company mergers (which might require valuing portfolios of inventions). In an article in Journal of Accountancy, J. Timothy Cromley has disclosed detailed information on "20 Steps for Pricing a Patent".

1. Check whether the patent is in force
2. Identify the context.
3. Gather information
4. Assemble a valuation team.
5. Read the patent.
6. Investigate the patent’s scope.
7. Talk with a patent attorney.
8. Inquire about the patent’s validity.
9. Inquire into blocking patents.
10. Consider synergies among patents.
11. Investigate foreign patent protection.
12. Consider the remaining life of the patent.
13. Analyze any prior royalties paid for the patent.
14. Inquire into any actual or threatened litigation involving the patent.
15. Identify the next-best alternative technologies.
16. Estimate a demand curve for the patented item.
17. Determine the patented product’s point of profit maximization.
18. Consider the applicability of traditional valuation approaches.
19. Do an income-approach valuation.
20. Write the patent valuation report.

The article provides good approach towards valuating a patent. You can read more to get better idea.

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