In an age where patents are becoming the material equity core of an enterprise, managers are being challenged to become all in one patent-business-technology experts in order to understand intrinsic patent value and generate revenue. Enterprises are disserved when managers eschew the daunting task of becoming the resident all in one. Without broad knowledge and experience in patent valuation, they rely on software tools or third party services to quantify a patent's value, and accept at face-value a single "score", or a ($) dollar value analysis that the software or service computes.

As dangerous as this practice is, it's also somewhat understandable – at least until a solution is provided by which they can in fact intelligently assess the disparate legal, commercial and technical attributes of a patent, and draw informed, business critical conclusions on the value of the combined patent factors.

Patents have been referred to as the most complex legal documents that exist. Patents define the legal boundaries of an innovation that the owner intends to exploit in commerce in order to create economic value. These three primary determinants are collective and interactive indicators of patent value:
(1) legal factors;
(2) commercial factors; and
(3) technological factors.

In 1965 Frederic Scherer published his study that tied patent data to innovation, launching a forty-year race by economists to develop ever more predictable methods of analyzing patent indicators to determine economic value.
As Trajtenberg, Jaffe and Hall (2000) observed, there have been many patent research programs conducted over the last four decades in an ongoing effort to quantify innovation, but one of the major drawbacks, extremely valuable as they had been, was that they relied exclusively on simple patent counts as indicators of some sort of innovative output. However, it has long been known that innovations vary enormously in their technological and economic "importance", "significance" or "value", and moreover, that the distribution of such "values" is extremely skewed.

Even the best methods employed by enterprise to maximize patent value are imprecise at best, and similarly complex. Today's managers are challenged to balance the assessment of all three factors, simultaneously, acknowledging that the determinant "value" of each factor can be arguably inverted as required to support a changing set of business objectives.

While serving as a Fortune 100 Business Development EVP, the author found that identifying the most valuable patents and products for acquisition or in-licensing required the assessment of all three patent factors, the critical foundation for SMART¹, his first innovation evaluation model that balanced innovation assessment using interrelationships between various patent factors.

Not surprisingly, this multiple factor analysis echoes the value creation process the author followed as a product development guideline during his more than 25 years as an inventor.

But legal, business and technology experts inherently weight patent factors differently – even though value maximization occurs only when all three factors positively converge. Veritably, patent attorneys will put more value on the patent legal factors such as claim scope, invalidity risk, and so forth. On the other hand, the technologist will more narrowly value a patent based on technical attributes, while the business professional will more broadly correlate patent value to the commercial opportunities that the patent helps create (Chart A).

"Valuation" by different experts will be computed quite differently, even though they would all be evaluating the identical patent. Different subject matter experts working together toward the same general objective would be unable to agree on a single rating system applied across the three patent factors that would adequately address the outside i