Patents are extremely valuable for a variety of reasons. A patent registration protects the invention from being used by others in all of the United States. It guarantees the inventor ownership prohibiting others from commercializing the patented invention. Let’s talk about a few of the major benefits of a patent.
1. Patents Increase Profits
A patent can generate millions, even billions, for you if you use it correctly, whether it’s through licensing or dominating the market. Here are some examples:
Direct to Market Premium Pricing
Being the first to market holds a lot of weight. With the help of a patent, yours is the only product available to your target audience. This allows your company to set the market price whether it’s a technology or a device. Generally, companies that are first to market are seen as trusted experts and innovators in the field, thus creating brand credibility and loyalty for which buyers will pay a premium.
Another way a patent generates revenue is through licensing. A registered patent gives the owner the exclusive right to produce, use, or sell the invention for a fee and royalties. This works well if the inventor does not have the required resources to produce and distribute the invention themselves, or if they simply don’t want to be a seller. Many companies in the United States exist solely by licensing their technology and product lines to other companies and are very profitable.
2. Patents Increase Company Valuation
Intellectual property (IP) may consist of patents, trademarks, copyright, and trade secrets. Patents are in many cases, the most important portion, especially in the high technology industry or consumer products.
Intellectual Property is a critical and very substantial portion of a company’s assets. Today, it is often the case that 50% to 90% of a Fortune 500 company’s value consists of intangible assets including, mostly intellectual property.
It is indisputable that a strong IP portfolio is key to obtaining venture capital, provide leverage in various business transactions, increase the value of the company in mergers and acquisitions (M&A), and provide for a large sum at your exit strategy, to name a few.
Attorneys specializing in intellectual property law should regularly advise their clients on how best to monetize their patent portfolio. This is an increasingly important concept. Determining the best approach for patent monetization requires a holistic analysis and a multifaceted strategy. Factors that weigh in the considering include market demand, the ability to commercialize the patent, and the strength of the patent application.
Patents Portfolio Acquisitions
The sale of patent portfolios is a very lucrative market. These types of transactions are often multi-millions of dollars. Examples include:
- Microsoft’s purchase of 800 patents from AOL for over $1 billion
- Intel’s purchase of patents from RealNetworks for $120 million, from Aware Inc. for $75 million, and from InterDigital Inc. for $375 million
- The sale of Nortel Networks’ patent for $4.5 billion in 2011
- Google’s purchase of Motorola’s mobile business with $12,00 patents for $12.5 billion
- And Eastman Kodak sale of their digital imaging patent portfolio for $25 million
3. Patents Obliterate the Competition
Patents create a barrier to entry, which blocks others from selling a similar product in direct competition with yours. For small companies, this gives you a chance to compete against large corporations. Even the smallest of start-ups can own more market share than a large corporation. Typically, a large corporation would have a massive advantage over a new start-up with an invention, but having a patent helps keep large corporations with huge marketing and manufacturing budgets from using your idea.
The right intellectual property lawyer who handles patents can help you keep your competitors on the sideline. For large companies, this allows them to dominate the marketplace.
4. Patents Attract Investors
Securing capital investment funding, whether venture capital or angel investors, is much easier if you can show a patent or a patent-pending. Plus, you can pitch your invention without fear of your idea being stolen. Potential investors will have peace of mind if they see you’ve taken the steps to secure a patent, which makes them feel better about investing in you as they see you are serious about your product, and there is a real chance to monetize the IP.
When it comes to pitching investors, you want to have a patent or patent-pending. It shows investors that your idea is innovative and that you have already invested a lot of time and money. It increases your valuation as a company and potentially gives you leverage in the negotiations with venture capital investors.
Are You Intellectual Property Savvy Enough To Develop a Valuable Portfolio?
Some business leaders believe in filing patents only if absolutely necessary and usually, this is because they don’t think patents are worth the financial investment. Anyone who subscribes to this other school of thought is just not savvy in building a valuable IP portfolio. The takeaway here is to be on top of developing a patent portfolio and go out of your way to put the right people on the task, specifically an intellectual property law firm that provides a seasoned patent lawyer.
Questions to Brainstorm with Your Patent Lawyer
The question should not be whether you can get a patent, but whether getting a patent is worth the investment. This is where a good patent lawyer comes in. By good, we mean someone who is not only experienced but also takes a holistic approach to your goals and advises on whether a patent is worth it for you. These types of patent lawyers are few and far between, but they are out there.
The questions you need to ask yourself, and can brainstorm with your patent lawyer, are
- What are you going to do with the patent once you get it?
- Are you going to license the rights so that you have a passive revenue stream of royalties?
- Are you going to sell the patented product yourself?
- Are you going to start to develop and sell the invention to show market need, to attract a licensing partner?
5. Patents are Cheap Compared to How Much Money They Will Make you
Cost-Benefit Analysis on Whether a Patent is Worth It
Is it worth the investment to get the patent? Patent costs can vary dramatically based on the complexity of the patent. The more complex an idea of invention, the higher the cost of the patent.
The Importance of a Patent Search
If you don’t see the product on the market, that doesn’t in any way mean it’s not already patented. Before you market the invention, you want to make sure you will not be subject to a patent infringement lawsuit. The second part of why a patent search is important is that it tells you if the product is novel enough for USPTO standards. Often people think something is unique, but from the perspective of the US Patent Office, that is not the case. That’s why the first thing you want to do is have an attorney do a patent search. Before you spend money on a patent application, make a smaller investment (runs between $1,800 and $2,800) in a patent search to see whether you have something patentable.
Patent Types and Costs
A non-provisional patent is also called a utility patent. Filing fees for a high-quality non-provisional patent application can be between $8,500 to upwards of $20,000, depending on what patent lawyer you use and the complexity of the patent. There will certainly be attorneys who offer lower pricing, but be wary of the old adage: you get what you pay for. The less you pay the less complete the application will be.
If you don’t have the funds for the non-provisional but you want to protect the patent now, you can choose to file a provisional patent application. The best way to view this is as a placeholder patent. While it is not technically a patent yet, it does protect your intellectual property for 12 months until you file for the non-provisional / utility patent.
There are also design patents. A design patent is great for fashion and apparel pieces, or the design of manufactured goods. This can expand to medical device shapes or certain features of a handbag. Design patents are significantly less expensive than utility patents.
Do You Really Need a Patent Attorney?
Sometimes people who are new to patents try to file their own patent applications. This is usually a recipe for disaster because it often costs more to respond to USPTO office actions due to incorrectly writing the application. These office actions are expensive and very challenging to overcome. While it may seem counterintuitive to new inventors, usually hiring a patent lawyer from the start ends up being less expensive.
The bottom line is that any discrepancies in your patent application can hurt your odds of patent approval when applying without counsel. Patent attorneys help ensure your odds of approval dramatically. Depending on their specialty in patent law, your patent attorney will understand design intricacies, technical aspects, and the computer science surrounding patents. This will save you from having to file multiple costly applications because your first application is created by using the extensive knowledge that only a patent attorney provides.
Beyond Patent Registration
Once you have registered your patent, your attorney can help stop other companies or individuals from infringing on your patent, sending them a cease and desist letter to take their products off the market.
The bottom line is that having a patent can make a huge difference to your company’s valuation, profitability, and long-term success. And choosing an intellectual property law firm with expert attorneys who specialize in both patent law and intellectual property litigation will be crucial to increasing the value of your company.
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Having a business attorney on your team to help you navigate complicated intellectual property matters, draft valuable service contracts, or fight a frivolous liability lawsuit levied against your brand can save you millions of dollars in lost revenue.