Predicting the value of intellectual property, especially a patent, is always a challenge. While different valuation formulas calculate all sorts of factors, such as market comparisons or income, these have limitations. But when combined with other variables, they can offer a pretty good estimate of what the value may be.
One of those variables is patent citations. Digging down into the citations helps determine where the value of your patent lies. The number of times your patent is cited or referenced by other patents often indicates how important it is to a particular industry or type of technology. The goal is to discover all previous information (which can be pretty substantial in today’s global market) related to your patent claims before filing your patent.
Each time a patent is cited in another patent, it limits that patent’s scope (how broad or narrow the claims). The more often your patent is cited in other patents, the more potentially valuable it is. That’s because your patent claims limit others trying to get competitive patents in your space.
There are two types of citations inside a patent document: The first is backward citations which cite any patents, prior artwork, or other materials from the past that impact the claims in your patent. That is where prior art searches and other searches come into play with patents.
Forward citations include references to new patent applications with claims that might impact your patent application. Obviously, there are more backward citation references than forward ones since there’s more information available from the past.
Using patent claims to help determine IP value is not new. It’s been studied and discussed in numerous articles throughout the last decade or two. It’s another approach to help make sense of the reams of data inside patents – so much data that it can be overwhelming.
But patent data does more than help determine financial value. It is also valuable for different purposes, including:
- Figuring out if you can get your patent based on your technology and what you intend to claim.
- Learning about which patents could limit the features of your product or technology.
- Discovering who your competition is and what they’re up to based on the types of patents they file.
- Identifying potential licensing partners.
Patents today are a big part of every startup and business. IP is the core of what makes or breaks many companies, and it’s becoming more important for founders and CEOs to understand their IP. It requires a strategy that considers the importance of doing homework upfront when developing your patent and business strategy.
Digging into patent citation information and using other patent analysis tools such as landscapes provides eye-opening information. It gives you a window into the future to see potential competitive threats, where their opportunity lies, and possible patent infringement litigation.
Of course, as with every theory about the statistical value of patent claim information, there’s still a question of whether or not citations are of any use in determining value. At the end of the day, it comes down to understanding how to use the information and applying it in a way that makes sense for your business or startup.
Rand Brenner is an IP professional whose passion is helping inventors, startups, and businesses of all sizes use licensing to turn their IP into income-producing products, services, and technologies. His decades of experience run the gamut from medical devices to food technology to consumer products. He’s licensed some of the biggest Hollywood entertainment blockbusters including the Batman Movies (1 and 2), and the number one kid’s action TV show, the Mighty Morphin Power Rangers. Rand speaks about licensing and is a featured speaker at investment conferences, trade shows, colleges, and startup events. His first book, Hidden Wealth: The Money Making Power of Licensing was released in 2019 and is available on Amazon.com. He’s also a published writer with articles appearing in several prestigious trade magazine including The Licensing Journal, Intellectual Property Magazine, and License India. Rand also mentors at the Cal State Fullerton School of Business and Economics and is a judge for their startup business plan competitions.