What is the Value of an Issued Patent?
Jacob Schmookler, who conducted the most extensive econometric study of patents, estimated the mean value of a patent as $80,000.00 in 1966.[1] Adjusting for inflation this would place the mean value of an issued patent at $506,000.00. This estimate seems reasonable based on other data points. For instance, Intel’s venture capital arm around 2000 would increase the valuation of any start-up they invested in by $1 million for each issued patent. Of course, not all patents are created equal and the very illiquid market for patents means that the value of any particular patent will vary significantly. If there were a strong secondary market for patents, we would not only have a better understanding of the value of an issued patent but also less variation. For more on how to create a strong secondary market for patents see Jump Starting a Secondary Market for Patents. (https://hallingblog.com/2009/11/16/jump-starting-a-secondary-market-for-patents/)
[1] Schmookler, Jacob, Invention and Economic Growth, Harvard University Press, Cambridge Massachusetts, p. 55, 1966.
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This blog is devoted to intellectual property innovation, patent law and innovation. The moderator, editor, and main 
author is Dale B. Halling. Mr. Halling is patent attorney and entrepreneur. As a patent attorney, Mr. Halling, has represented numerous Fortune 500 companies including, McDonnell Douglas, Boeing, Motorola, Ameritech, SBC, MCI, Cypress, and numerous technology start-ups. He has helped his clients obtain patents worldwide. Mr. Halling has a BS in Electrical Engineering from Kansas State University, an MS in Physics from the University of Texas at Dallas and a JD from St. Louis University. Mr. Halling is the author of the book “The Decline and Fall of the American Entrepreneur: How Little Known Laws are Killing Innovation.”
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There may be a risk of your readership coming away from this post thinking that their patent is worth $500,000, which is most likely very far from the actual value of any given patent.
I think your statement “the value of any particular patent will vary significantly” is true, and in fact renders the calculation of a mean value of a patent meaningless. Also, the patent landscape has changed significantly enough in the past 40 years so that a simple “gross up” for inflation may not tell us anything about a patent issued today.
Until the creation of a liquid secondary market, valuation of IP assets will continue to require in-depth analysis and significant research. Patent owners should consider hiring valuation professionals (or, at a minimum, do their own research as to where their patents may fall on the value spectrum) rather than relying on simple averages.
While it is an interesting tidbit for people like us who spend all day thinking about this, we should be sure stats like this aren’t misused by those who don’t.
Thanks,
Daniel J. Steinert
Ocean Tomo, LLC
Comment by Daniel Steinert | December 16, 2009 |
Dale,
Daniel has an interesting point. Are there statistics that show the median (rather than mean) value of a patent?
Kevin
Comment by khalling | December 29, 2009 |
Kevin,
Because there is not an active secondary market for patents it is very hard to get any valuations. It is almost impossible to put a value on a patent that is not associated with an product that is being actively marketed or infringed.
Comment by dbhalling | December 29, 2009 |