Innovations, discoveries, R & D and patents are some of the crucial steps for ensuring success of an organization. Since innovations are of extreme importance for achieving competitive edge in today’s world, their safety and protection can create substantial corporate success. Patents and innovations are therefore considered to be the success factors for all kinds of companies and industries.
In perspective of organizations’ expanding capital prerequisites, and increasing exploitation opportunities on global money related markets, patents are additionally of extensive interest for partners and investors. Accordingly, the management of intangible assets is an important element of strategic management which is continually growing in significance.
A study was conducted by PricewaterhouseCoopers for investigating the status quo of patent valuation in the corporate practice. It came out as a consequence of the noticeably increasing interest of the capital market in intangible assets. The investigation was majorly focused on the current significance of various technologies and patents, valuation methods and strategies in companies and that of the status of the value oriented management of patents and technologies.
According to the survey reports, more than 90 percent of the interviewees highlighted the significance of patents and innovations for corporate success. Innovative and unique products accounts for around 66% of the participant’s turnover and for 60% of their margins and profits. Patents, which are one portion of the general field of advancement, are additionally held in high regard as drivers of progress. Around 58% of the participants responded that patents are of utmost importance in determining a company’s success. However, out of 57% of the companies which were interviewed in this regard, only 12% answered this question in a negative way.
In order to determine the contribution of patents to the success of the company, it is advised that patents should always be managed and valued. This can be done through financial and non-financial valuation methods. While the value of issuance of a patent can be determined relatively, the actual valuation of a patent needs an appropriate set of tools and techniques. Financial valuation can be done with the help of various factors like, capital value, market price and cost oriented methods. These methods when combined with non-standardized specific procedures they involve, result in a great deal of uncertainty in the valuation of patents.
The results in respect of the financial valuation methods came as a surprise. For a particular thing, the participants revealed that financial valuations are conducted relatively rarely. For another, 44 percent of the companies quoted that they use a cost oriented valuation method, sometimes even for management events. This result came as a surprise since the management (which regularly asks about the value contribution of their patents) will find it difficult to infer the importance from this method.
It is also surprising, taking into consideration, the importance of value oriented innovation management. There appears to be a wide dispersion on the application of these methods, even if all the financial valuation processes are applied more frequently or rarely depending on different circumstances. It has been deduced on the basis of various reports that cost and market price oriented processes tend to be used as specialized instruments, whereas capital value oriented processes tend to fulfill more of a broadband function.
The results of this study confirms that patents are no longer only used for protection of your innovations but nowadays are also being seen as a success factor and an asset for organizations.
The results also identified many complexities and uncertainties pertaining to the valuation of patents. These uncertainties leads not only to a bad management of patents but also to insufficient utilization of potential values in patents. The path from a presently dominating risk and cost approach in patent valuation to an income and application based approach still seems to be difficult for companies.
The path from a currently dominating risk and cost approach in patent portfolio management and patent valuation to an at least application dependent opportunity and market or income based approach still seems to be steep and breathtaking for enterprises. Cresting this task aids to manage patents and patent portfolios better and also promote the utilization of patents.