Interesting post. The crazy games that Apple have tried to play with the iPad did make me wonder about whether patents prevent innovation rather than promote it.

I think the reality of the IT world is that technology evolves so quickly that a patent which lasts for 20 years could give you a monopoly position. Allowing you to develop yet further IT patents, and destroying any hope that anyone could ever compete with you.

Perhaps when it comes to IT technology, we should consider shortening the life of IT patents to reflect the rapid evolution of IT technology. Or, doing away with certain kinds of IT patents to reflect the fact that the innovation will happen in any case and patents are no longer in the interests of consumers.

An interesting analogy is the fashion industy, where there are no patents. In the fashion industry, you cannot protect your stitching, colour pattern, or your particular design. The reason, I believe, is that it would be impracticle to give someone the rights to create a certain style of t-shirt (and then allow them to charge a royalty of anyone else wanting to copy that style). The fashion industry is arguably one of the most innovative industries in the world. It has no patents.

I totally agree that all the tools discussed above give an indication of value rather than a definitive value.

I would say some or all of these valuation tools should be used to get a range of values for a company. Based on this range you can then make a investment decision.

Keep up the good work.

Brett

NOTE: Despite the above people should ensure their assumptions are sensible otherwise there is no use doing any analysis.

Great website btw
All the best,
Roel