Patent valuation (indicator approach)

The indicator approach is a qualitative consideration of a patent’s value which looks at certain distinctions in the features of a patent such as the number of inventors or citations of the patent. Using this approach allows companies to compare patents against each other.

Posted March 16, 2017

What is the indicator approach?

The indicator approach is a qualitative consideration of a patent’s value which looks at certain distinctions in the features of a patent such as the number of inventors or citations of the patent. Using this approach allows companies to compare patents against each other.

There are several factors that are considered in this approach including:

• Number of inventors
• Number of citations
• Patents per employee
• Age of patent
• Patent status – whether it is granted or pending
• Litigation
• Patent family size
• IPC classification

One of the most significant and valued qualities is the size of the patent family; a big patent family size indicates a higher value, usually because this suggests a larger market size.

The amount of citations can also help determine the importance of a technology as the more citations, the stronger the suggestion that competitors are also developing that technology.

What are the advantages of using the indicator approach?

• Compare different kinds of patents
• Assess the commercial value of patents in different markets
• Failure rate is low due to basis in empirical data on traded patents in the past

What are the disadvantages of using the indicator approach?

As the indicator approach is typically used in combination with other approaches – particularly the market value approach, it can be difficult to identify the correct set of metrics to take into consideration.