Written by: Keegan Caldwell, PhD
When Avon River Ventures recently clarified its valuation of Edgewater Wireless Systems’ IP portfolio, it revealed an increasingly common approach in today’s IP market: forward-looking IP valuations contingent on future milestones. The organization’s March 6, 2025 press release made it clear that this wasn’t about Edgewater’s current financial position but rather a speculative projection of “potential value contingent upon achieving key commercial and operational milestones.”[1] While this represents a shift from traditional valuation approaches, it also clearly reflects the evolving nature of modern patent valuation.
Future-focused valuations have become increasingly relevant as the patent landscape transforms. Several factors drive this trend: improved data availability for accurate market comparisons, accelerated patent approval processes, and faster technology adoption cycles. Today, where IP assets often represent a significant portion of company valuations—intangible assets comprise at least 90% of the value of S&P 500 companies—the ability to assess a patent portfolio’s true value, both present and potential, has become an essential skill.[2]
While forward-looking valuations offer significant opportunities, legal professionals must still exercise appropriate caution and due diligence. Attorneys need to recognize potential warning signs during IP due diligence in order to best guide clients toward sound investments and help them avoid assets that may not deliver their promised value. By understanding these red flags and working with reputable valuation professionals, attorneys can help clients make informed decisions about the true value of patent portfolios.
Red Flag 1: Commercial Viability Concerns
The value of intangible assets often follow a non-linear trajectory across their lifespan that spikes and declines over time. This dynamic creates several challenges when assessing commercial viability, particularly in relation to the remaining patent lifetime. Traditionally, patents have been thought to reach their peak value after many years—historically around 12 years into their 20-year term.[3] However, the market is shifting. With accelerated patent processes like the USPTO’s Track One program allowing patents to be granted within a year.[4] That, along with faster technology adoption rates, many patents now reach their peak value much earlier—often within 5-8 years of filing.
This acceleration means attorneys must consider both immediate value and future potential when evaluating portfolios. The patents that emerge as a portfolio’s crown jewels can shift dramatically as markets and competitors evolve. Today’s central patents might become tomorrow’s afterthoughts, while previously overlooked assets suddenly become goldmines when technology shifts.
Remaining Patent Lifetime
With that in mind, valuable patent portfolios must have sufficient remaining lifetime to justify investment, with several concerning signs that should immediately raise questions about the portfolio’s long-term viability. Patents that are set to expire within five years without extension options or supplementary protection certificates represent diminishing assets rather than long-term value drivers. The pharmaceutical sector provides a significant example of how patent lifetimes directly impact investment value and commercial strategy: 91% of drugs that obtain patent term extensions continue their monopolies well past the expiration of those extensions.[5]
Technological Obsolescence
Technological obsolescence indicators represent another crucial aspect of commercial viability that requires careful scrutiny. A concerning pattern emerges when there is a lack of follow-up patents or continuation applications, suggesting that innovation has stalled.[6] Similarly, declining royalty streams can indicate waning market relevance. Perhaps most telling is a failure to adapt to evolving industry standards or market demands, which often signals that a patent portfolio is becoming technologically outdated. Modern technological standards evolve rapidly, and patents that fail to align with these evolving standards quickly lose their commercial value regardless of their remaining legal lifetime.
Dependency Issues
Dependency issues present a third dimension of commercial viability concerns that can potentially impact a portfolio’s actual value. Portfolios that require extensive cross-licensing or rely heavily on third-party patents for implementation may carry additional considerations that should be factored into their valuation. For example, portfolio cross-licensing and patent pools can reduce some costs by allowing firms to license multiple patents at once, but negotiating these agreements can be intense and time-consuming—factors which can be expensive on their own while also leading to hidden costs associated with managing and enforcing such agreements.[7] Additionally, serious reliance on third-party patents can create dependencies that can lead to increased costs, such as higher licensing fees or the risk of losing access to critical technologies if agreements are terminated.
Red Flag 2: Questionable History and Practices
Follow the money trail to uncover a patent portfolio’s real story. When law professionals see patents bouncing between multiple non-practicing entities (NPEs) without generating actual licenses or being implemented, this warrants closer examination. When patents repeatedly change hands among entities with zero interest in practicing the invention, this may indicate a portfolio being valued primarily for litigation potential rather than technological contribution.[8]
It is equally important to analyze licensing patterns. Analyses of licensing practices, particularly excessive licensing fee demands that significantly exceed industry-standard rates, can signal unrealistic valuation expectations and potential challenges in monetization. Patents associated with royalty demands that are out of line with comparable technologies in the same field often face resistance from potential licensees and may ultimately generate less revenue than projected. It’s important to compare a portfolio’s licensing demands against established industry benchmarks. In forward-looking valuations like the one provided by Avon River Ventures, which emphasized “capturing market share” and “generating sustainable revenue,” assumptions about achievable licensing rates play a crucial role in determining practical value.
Administrative encumbrances including lengthy patent prosecution histories with multiple rejections and amendments, liens or security interests recorded against the patents, or other legal entanglements may affect transferability or enforcement options—issues that should be considered in valuations. For instance, prosecution history estoppel can limit the scope of claims during litigation, potentially affecting a patent’s enforceability.[9]
Red Flag 3: Validity and Enforceability Issues
When evaluating an IP portfolio, patents with overly broad, vague claims failing to meet specificity requirements deserve special attention. Such claims create vulnerabilities that can affect enforceability. The numbers tell a sobering story: At the Patent Trial and Appeal Board (PTAB), invalidation rates have been climbing steadily since 2021, reaching a concerning 71% during the first half of 2024. And throughout 2023, a full 68% of cases saw all challenged claims invalidated. For patent holders and the attorneys supporting them, these statistics underscore the importance of precise, well-crafted claims.[10]
At the same time, be aware of patents with prior challenges—those previously questioned or invalidated in court, patents with unresolved prior art issues that slipped through prosecution, or patents covering technology that’s evolved significantly since filing. These factors should be examined as part of a comprehensive portfolio evaluation. Search for any history of challenges in both traditional litigation and administrative proceedings like inter partes reviews. In that process, be sure to ask: Do these patents effectively cover technology as it’s currently used, or has innovation progressed beyond their scope? This technological alignment becomes especially important when evaluating forward-looking valuations that assume future commercialization.
Finally, the importance of investigating supporting documentation like lab notebooks, inventor records, and “reduction to practice” evidence cannot be overstated. In patent litigation, the ability to demonstrate proper inventorship and reduction to practice can be decisive, particularly in cases involving priority disputes or allegations of improper inventorship.[11]
Patent Promise and Reality: Protecting Client Interests
Attorneys can use an understanding of these red flags to conduct thorough due diligence on patent portfolios regardless of their stated valuation. By systematically evaluating commercial viability considerations, historical practices, and validity and enforceability issues, legal professionals can develop a more accurate understanding of a portfolio’s true value and potential risks.
While forward-looking valuations have become increasingly important, they should be grounded in solid methodology. The best valuations tie patent coverage directly to current revenue streams—either from the patent owner’s products or from market applications by other companies—while making conservative, well-informed projections about future market growth. Working with reputable valuation professionals who use data-driven approaches can help establish reasonable values that benefit both buyers and sellers.
By developing expertise in identifying and contextualizing these potential red flags, attorneys can better support their clients by providing realistic assessments of patent portfolios and the risks and opportunities associated with their acquisition, licensing, or enforcement. As intellectual property continues to dominate company valuations, attorneys who master the art of patent portfolio scrutiny won’t simply serve clients—they’ll protect them while helping them capitalize on legitimate growth opportunities.
[1] “Avon River Ventures Clarifies Forward-Looking Valuation Basis of Edgewater Wireless System Inc’s IP Portfolio.” FinTech Futures. Informa PLC, March 6, 2025. https://www.fintechfutures.com/techwire/avon-river-ventures-clarifies-forward-looking-valuation-basis-of-edgewater-wireless-system-incs-ip-portfolio/.
[2] Berman, Bruce. “Latest Data Show that Intangible Assets Comprise 90% of the Value of the S&P 500 Companies.” IP Close Up. January 19, 2021. https://ipcloseup.com/2021/01/19/latest-data-show-that-intangible-assets-comprise-90-of-the-value-of-the-sp-500-companies/.
[3] Krajec, Russ. “How to Find a Realistic Patent Value.” Blue Iron IP. December 27, 2021. https://blueironip.com/how-to-find-a-realistic-patent-value/.
[4] “USPTO’s Prioritized Patent Examination Program.” USPTO.Gov. United States Patent and Trademark Office, September 24, 2021. https://www.uspto.gov/patents/initiatives/usptos-prioritized-patent-examination-program.
[5] Feldman, Robin. “Patent Term Extensions and the Last Man Standing.” Yale Law & Policy Review 42, no. 1 (2023). Accessed March 10, 2025. https://yalelawandpolicy.org/patent-term-extensions-and-last-man-standing.
[6] Thakur, Sanket. “Continuation Patent Application Vs. Continuation-In-Part.” TT Consultants. June 10, 2022. https://ttconsultants.com/continuation-patent-application-vs-continuation-in-part.
[7] “Chapter 3: Antitrust Analysis of Portfolio Cross-Licensing Agreements and Patent Pools.” Justice.Gov. Antitrust Division: The United States Department of Justice, May 30, 2014. https://www.justice.gov/sites/default/files/atr/legacy/2014/05/30/chapter_3.pdf.
[8] Lemley, Mark A., John R. Allison, and David L. Schwartz. “How Often Do Non-Practicing Entities Win Patent Suits?” Berkeley Technology Law Journal 32, no. 237 (2017). Accessed March 10, 2025. https://law.stanford.edu/publications/how-often-do-non-practicing-entities-win-patent-suits/.
[9] Huang, George J. “Prosecution History Estoppel: Differences in Regulations between U.S., China, and Taiwan and Suggested Strategies.” AIPLA.Org. American Intellectual Property Law Association, June 21, 2023. https://www.aipla.org/list/innovate-articles/prosecution-history-estoppel-differences-in-regulations-between-u.s.-china-and-taiwan-and-suggested-strategies.
[10] Schreiner, Stephen. “Recent Statistics Show PTAB Invalidation Rates Continue to Climb.” IP Watchdog. June 25, 2024. https://ipwatchdog.com/2024/06/25/recent-statistics-show-ptab-invalidation-rates-continue-climb/id=178226/.
[11] “What Is the Difference Between “Constructive Reduction to Practice” and “Actual Reduction to Practice”?” Wysebridge. March 12, 2025. https://wysebridge.com/what-is-the-difference-between-constructive-reduction-to-practice-and-actual-reduction-to-practice.
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