Patent Valuation for Fair Royalty Distribution in Patent Pool

In this paper, we discuss patent pool and a patent valuation scheme for fair royalty distribution among the patents in a pool. In the knowledge-based economy, intellectual capital—the accumulation of technology and know-how—is recognized as the most important source of company’s competitive advantage and economic growth. By providing exclusive rights to patent holders, the patent system aims to encourage innovation—invention & commercialization of new technologies—in order to raise the standard of living. However, drawbacks of patent system, which occur as the number of patents issued increases rapidly and patent ownership is fragmented, may slow down the innovation efforts seriously. A promising solution is the patent pool approach, which was for instance employed by the U.S. congress during World War I to free the airplane manufacturers from the patent tangle by letting them license all the patents for a fee. It is necessary to figure out relative technological contribution of patent for fair distribution of royalty revenues among patent holders. The Rating/Ranking Method seems to fit to that valuation purpose. We examined technology valuation models from various organizations and selected a set of more influential valuation factors which can be incorporated as scoring criteria in the Rating/Ranking Method.