Income Approach This method looks to future cash flows in determining valuation. It states that a patent's value is the present value of the incremental cash flows or cost savings it will help provide. When a company or individual develops a product that has the potential to be patented, the underlying hope is that the patented product will cause an increase in sales, or at least be a cost-saving measure in the company. This approach states that the patent's value is the current cash value of these future benefits.
Market Approach This methodology involves determining what a willing buyer would pay for similar property. In other words, the patent's value is the value of similar patents or patented products that have been sold and purchased before. Two things must be in place for this approach to be used for patent valuation:
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