VALUATION Corp. Provides Professional Valuation of Patents for Inventions, Utility Models, Industrial Designs and Selection Achievements in Russia

Approaches to Patent Valuation in Russia

The market value of a patent for an invention (or other patentable IP object) is mainly determined by the economic benefits that the patent holder can receive from using his patented intellectual property in commercial activity or other areas. The examples of such benefits are:

• ability to create new goods or give existing goods new properties;
• ability to lower production costs of goods (services);
• ability to expand sales of goods (services) onto new markets.

Most often, valuation of patents in Russia is conducted using the income approach to appraisal.

The main advantage of income approach is that its methods allow calculating the value of the subject patent based on potential income that the patent holder can receive from using his patented intellectual property, thus connecting the patent’s economic benefits (commercial effectiveness) and its market value.

Applicability of comparative (market) and cost approaches to patent valuation in Russia is very limited.

Comparative (market) approach, based on a comparison of the subject patent to its recently sold analogues whose price is known, is almost never used because the IP market in Russia is rather non-transparent and information on patents transactions is almost always closely held and difficult to access.

Cost approach, based on calculating reproduction cost of an object, is generally ineffective for valuation of patents, because the market value of a patent is often rather weakly connected with the costs of IP development and commercially successful IP objects are often made with very modest budgets. The main applications of cost approach to patent valuation in Russia are for accounting, notarial and taxation purposes.

Information and Documents for Patent Valuation

The following documents and information are usually required for patent valuation:

• copy of the patent;
• description of an invention or other IP object protected by the patent;
• information about the rights of third parties in relation to a patent (licensing agreements, copyright agreements, etc. - if any);
• information about the initial and residual book value of patented IP object (if patent holder is a legal entity and patented IP is part of its intangible assets);
• description of patented IP actual or potential commercial usage;
• description of possible economic benefits from use of the subject IP;
• quantitative data characterizing the economic benefits of using patented IP object, for example:
  • cost advantage - reduction in the cost of production of goods (services);
  • gain in productivity - increase in production volume of the enterprise while maintaining same costs;
  • gain in quality - improving quality of products, which allows to increase the price per unit and/or increase the total volume of sales;
  • possibility of saving on capital investments;
  • other possible economic benefits.
• quantitative data on annual revenues received from sales of goods (services) produced using the subject IP for the past 3-5 years - nomenclature of goods (services), unit price and total sales volume by each year;
• proceedings from sales of licenses to use patented IP (if any);
• business plan for the commercial use of the subject patented IP for the next 3-5 years (if the subject IP is not used commercially so far and only is planned to be used).