is a patent worth?
November 2000, lawyers representing NTP, Inc. invited Research
in Motion, Ltd. (RIM) to take a license to NTP's portfolio
of patents related to wireless e-mail.
refused to take a license.
November 2001, after failing to secure an amicable agreement,
NTP filed suit in U.S. District Court against RIM accusing
the Canadian provider of wireless e-mail service of infringing
eight of its U.S. patents.
refused to settle.
November 2002, a jury found in favor of NTP and ordered RIM
to pay $51,6m in damages for willful infringement plus a
running royalty of 5.75% on future sales. The District Court
also awarded NTP a permanent injunction against RIM.
refused to settle and filed an appeal. The injunction was
stayed during appeal.
January 2003, RIM
announced that the USPTO had started
re-examination of all five of NTP's patents remaining in
2004, the Appeals Court issed its ruling, partially affirming
and partially overturning the District Court. RIM appealed
to the U.S. Supreme Court and then announced that
it had reached a settlement with NTP: $450m for a fully-paid
final and full settlement of all claims to date against
RIM, as well as for a perpetual, fully-paid up license
going forward. The amount relates primarily to settlement
of past damages, and includes the judgment and money escrowed
to date totalling $137 million (the $152 million previously
accrued included approximately $15 million in other litigation
related fees). It is expected that a substantial
portion of the $313 million, which is the balance of the
settlement amount, will be expensed in the fourth quarter,
ended February 26, 2005.*
failed to complete the agreement.
October, 2005, the U.S. Supreme Court refused to hear RIM's
March 2006, RIM announced that
it come to an agreement with NTP: $612,5
million in full and final settlement of all claims against
RIM, as well as for a perpetual, fully-paid up license going
What is a patent
worth? In March 2006, NTP's patents were worth at least $612,5m.
Undoubtedly, had RIM's management concluded an agreement with
NTP when first approached, the value of NTP's patents would
have been substantially lower. As
the Washington Times observed, "high-profile,
high-priced eleventh-hour settlements reveal little about the
often overlooked and remarkably low royalty deals that could
have been reached earlier."†
fact of the matter is that it is very difficult to assign
a value to an individual patent or portfolio of patents,
but there are many instances where some sort of valuation
when patent valuation is needed
Before initial filing - The decision to file an application
for patent is a commitment to a significant cash investment.
If a obtaining a patent does not create value, it only
creates costs. Although at this early stage, the uncertainties
of future value are very high, some attempt must be made
to justify the expense of obtaining the patent.
Before grant - A lot can happen during prosecution: claims
might be cancelled or amended, a lot of prior art may limit
the scope of the patent, a lack of prior art might indicate
an even broader scpe of protection is available than orginally
thought. The potential value of a patent can change substantially
during prosecution. Before paying the issue fee, it can
make sense to confirm the patent's value.
Before foreign filing - Obtaining patent coverage in more
than one country substantially increases the costs of patenting.
Whilst an invention may be very valuable, it not be worthwhile
to obtain patent protection for the invention in more than
a few key countries.
Post grant - After a patent is granted, there are numerous
instances where valuation might be needed:
before paying maintenence fees.
b) when deciding on, or establishing a licensing program.
c) for accounting purposes
d) in establishing mergers and acquisitions
e) in divestitures
f) in litigation
g) when seeking venture capital
of valuing patents
are basically four methods that are used to determine the
value of a patent:
costs - useful, and sometimes necessary, for accounting
and tax purposes, but useless otherwise.
b) market based methods - using comparable
royalty rates and industry averages is a method commonly
used in litigation.
c) income - accounting for future value using
discounted cash flows (DCF) and net present value (NPV).
There are several ways to do this.
d) options pricing theory - man variants based
on Black-Scholes options pricing model have been proposed
over the past decade.
of these methods has advantages and shortcomings.
AB can help you wade through the confusion of patent valuation
and provide you with the insight you need to make strategic
Contact Avvika AB for
a personal consultation to see how we can get your patent portfolio
working for you.
RIM Press Release, Research
In Motion And NTP Agree To Resolve Litigation, March 16,
a hearing on Feb. 25, 2003, three months after the jury's
verdict, [Judge] Spencer expressed surprise that the case
was still before him "because, frankly, I never thought
the case would make it to trial," he said. The judge
proffered a theory: "It
seems to me that some of the folk took it personally, and
that's how it got this far."