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How weird is this asset category? (A saga of squandered investment and hidden value) Tuesday 30 May 2017

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Patents. Most of them have no value. Some are blockbusters. And here is the twist: some have high intrinsic value, but are worthless in the hands of their current owner.

Given their finite life, this is sadder than a grandmaster lying hidden in the attic.

How can intrinsic value not be recognised?

Most companies don’t understand patents. Most business analysts don’t understand patents. Most patent attorneys don’t consider monetisation. And patent markets are inefficient.

Am I justified in branding this asset category as ‘weird’?

Consider five character traits:

  • Patents endure a long gestation period. During this arduous process the scope of their claims can be significantly reduced. Potential can diminish in the womb.
  • They are not always what they seem. Even after grant, the validity of a patent can still be challenged.
  • A great invention and associated patent don’t always equate to high value. To provide worthwhile protection, a patent must protect commercially important features of an invention.
  • The concept of ‘best owner’ influences the value of all assets – for patents its impact is magnified. This is because a range of complementary assets are usually required to make a patent commercially active.
  • A patent is a weapon rather than a warrior. The inferred monopoly benefits don’t just happen. The patent owner must be willing and able to enforce their rights.

Don’t get it wrong; the ‘weird’ classification doesn’t mean that we are patent haters. It is just that they need skillful management to avoid endless repetition of a sorry saga of squandered investment and hidden value.

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Here is an outline of a more uplifting story.

Start with some data analytics of the patent landscape. Understand what’s already out there. Get to know the main players and their networks. Make sure you don’t waste money researching something that is already known.

Add depth to these insights through attorney review. Get to know the would-be hero, and the adversaries. Understand their breadth and validity. Can they be circumvented? Can they be enforced?

Of course, we should already have gauged the target market attractiveness.

More than just its size and growth. Are consumer needs adequately served, and are they changing? What are the competitive forces? Finally, add structure to the narrative.

A value-based framework integrates all of these perspectives, and increases visibility of economic dimensions: time to market; probability of success; incremental utility; financial parameters, and commercial risk. The complexity of these inputs cannot be adequately expressed in a single number. But scenario valuations clarify key value drivers and information gaps.

Yes, patents are a weird and complex asset category, but they can provide monopoly rights to an invention.

They can secure competitive advantage - and increase monetisation options by making it transferable. In the right circumstances patents are well worth pursuing.

And despite their complexity, patents can be robustly evaluation, but this requires a range of integrated skill sets.

Sometimes seemingly weird characters just need to be better understood! Insightful metrics help:

  • direct R&D investment to the most valuable opportunities;
  • decide on the most appropriate form of IP protection;
  • develop effective commercialisation strategies; and
  • articulate the economic strength of technology to investors.

So turn weird into valuable. Even if you don’t uncover a blockbuster, better analytics will reduce costs, mitigate risk, and enhance earnings.

Contact our Valuations experts  to turn weird into value for your business.

Contact our advisory experts to identify new opportunities for your business

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