Does your invention have value?

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All new inventors, whether they are individuals, small companies, or even large corporations, want to understand the value of their inventions. Unfortunately, there is no magic formula for determining this. The value is determined by whether the invention is patentable, by the amount of money you can make through selling products or services under the patent, and by any licensing fees you can obtain from others interested in your invention. Be wary of anyone that suggests they can value your invention by performing a "market survey."

Identifying your Invention

The first step in valuing your invention is to identify your invention. It is very important to understand the difference between an invention and the product or service that is sold to the public that contains the invention. An invention is an idea that was not previously known. To be patentable, the invention must be both new (no one can have done it before) and non-obvious. A new product may not contain any inventions, may contain a single invention, or may contain many inventions. Note that the presence of "inventions" is not a determining factor in the profitability or value of a product. A new product might contain many new and valuable inventions, but the product itself might not be a commercial success. Such a product might be "before its time," might be poorly marketed, or might combine the valuable inventions in an uninteresting or ill-conceived combination. Alternatively, a product with no protectable inventions might be a great commercial success because it is well-timed, well-marketed, or simply meets a need that was going unmet in the marketplace.

As a result, if you want to determine the value of your invention, then you need to determine what actually constitutes your invention. If your company has developed a new product, you (or your product development team) should identify those aspects of your product that differentiate it from competitive products. If these differences are new (no one had incorporated these elements into the product before) and valuable (people will be more likely to buy your product because of these differences), then you should consider these differences to be potential inventions. It is these areas of difference that can be considered your invention. In other words, if you develop a new doohickey, don't think of your invention as a new doohickey but rather think of your invention as the three new features that you added to your product that make your doohickey more interesting and more useful to your customers.

How to Value Your Invention

Even unpatented inventions can be quite valuable. But if an invention is useful and easy to copy, it is likely that your invention will be copied by your competitors soon after you tell the world about it. Your invention might be extremely valuable to the world at large because it improves efficiency or increases world happiness, but it is less valuable to you if you cannot control who uses and sells your invention. This is why patents exists--to provide a limited exclusivity to you on your invention (see our guidance on Why Should You File a Patent Application? for more information on this). But patents are expensive, so it makes sense to itemize and analyze your inventions before deciding to file for patent protection.

Inventions that are valuable generally have the following characteristics:

  • They are different than what people have done before,
  • They create a competitive advantage in the marketplace (people will pay more for a product that has this invention),
  • They are the type of invention that is eligible for patent protection, and
  • They are easy to spot when used by a competitor (which makes it easier to enforce patent rights, if they are obtained).

Can You Trust Invention Submission Companies to Value Your Invention?

Like most patent attorneys, we are generally suspicious of invention submission/promotion companies. Companies in this business have a history of engaging in unethical behavior, while many such companies have been outright fraudulent. The U.S. Patent and Trademark Office has a web page dedicated to the issue of invention promoters and cautions that can be useful to avoid being the victim of a scam. Federal law (35 U.S.C. 297) now requires that an invention promoter disclose to potential customers the following information:

  1. the number of inventions evaluated by the invention promoter for commercial potential in the past 5 years, as well as the number of those inventions that received positive evaluations, and the number of those inventions that received negative evaluations;
  2. the total number of customers who have contracted with the invention promoter in the past 5 years, not including customers who have purchased trade show services, research, advertising, or other nonmarketing services from the invention promoter, or who have defaulted in their payment to the invention promoter;
  3. the total number of customers known by the invention promoter to have received a net financial profit as a direct result of the invention promotion services provided by such invention promoter;
  4. the total number of customers known by the invention promoter to have received license agreements for their inventions as a direct result of the invention promotion services provided by such invention promoter; and
  5. the names and addresses of all previous invention promotion companies with which the invention promoter or its officers have collectively or individually been affiliated in the previous 10 years.

Some invention promoters will charge you to do a "market analysis" for your invention. Frequently, this analysis is not useful. The analysis is done, for instance, on your product as opposed to your invention, and on an entire market as opposed to an analysis of the utility of your invention within that market. Thus, if you have an improved tread design for an automobile tire that improves traction on sandy soils, it is not particularly helpful to receive an analysis that multiplies the number of cars currently on the road by four (four tires per car) and then multiply this by the average price per tire. While that may be one method to calculate the size of a "market," this is unrelated to the actual value of your invention.

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This guidance is provided by the attorneys of Tysver Beck Evans. Please contact us if you need help protecting your intellectual property. The legal information provided in this guidance should be distinguished from actual legal advice. Please see the Guidance index page for more information.