When George Washington signed the Patent Act of 1790, he probably had no idea what an impact American ingenuity would have on the world. Surely, to a man like Washington, the idea of a cell phone, the internet, or even an automobile would have been dubbed as pure fantasy, but the spirit behind the Patent Act of 1790 is as relevant today as it was when it was first signed into law. Patents are, by definition, a legal right that is given to inventors by the government that not only gives the owner exclusive control over the reproduction, use, and sale of their creation but also, allows the inventor to reap the financial rewards associated with their invention.
Although the concept of a patent may strike you as simple, patent law is very complex, and the patent filing process normally requires the assistance of a lawyer like The Patent Professor. This fact is due to a number of reasons one of which is the financial value that a patent can yield to its holder, and the potential monetary losses a holder can incur due to filing a patent application incorrectly. As such, once you have been granted a patent or have a patent pending for your invention, the most important question you have to answer is “How much is my invention worth?”
3 Things to Consider When You Value Your Invention
There are many things to consider when you are placing a value on your new invention, and the starting point in the valuation process can be different depending on the nature of the creation. Generally, there are three important facts you should consider during the valuation process.
1. Who do You Want to Sell to?
While this question may seem obvious, it is often left unanswered by many inventors, because they are inventors, not business specialists. However, the type of customers you want to sell your product to, which is often referred to as a “target market,” will play a key role in determining the value of your invention, because as a general matter, a product is only worth as much as the consumer can or is willing to pay for it. This information can then be used if you are considering things such as selling your invention to a company, producing the product yourself, etc.
2. How Much Does Your Invention Cost to Make?
Whether you are planning on selling your invention on your own or selling the patent rights to a company, you always want to know or at least be able to project how much money it will cost to reproduce your invention. This calculation should include the cost of part or materials and labor. Once this is calculated, you can determine how much profit can be added to each unit you produce. The value of each unit should be consistent with what your target market would be willing to pay in order to purchase your invention. If you are planning on selling the patent rights to a company, you would use this figure to project how much money the company could potentially make by producing your product and use this figure during purchase negotiations.
3. Who are Your Competitors?
One of the essential tasks a patent attorney performs for their clients is reviewing existing patents before filing a new patent application. You, as an inventor, need to use the same review process, but you should be considering inventions that are already on the market, rather than existing patents. The fact is, if a product already exists that doesn’t use the same technology as your invention but performs the same function in a more cost effective or efficient manner, you should carefully consider whether or not your invention can effectively compete with other products in the consumer market. Your product’s ability to compete and offer advantages over other inventions already being produced will have a significant impact on the value of your creation.