What makes a patent valuable?
The Patent Contract.
A patent is a legal document that provides exclusive commercialization rights for up to 20 years to the person that invents something useful, new, and non-obvious. In exchange for what are effectively monopoly rights to that invention, the inventor is required to disclose how to make & use the invention in precise and exact terms.
Patents are frequently considered valuable assets but the patent alone doesn’t generate any value.
Instead, value comes from:
1. Strategic Positioning
- Ensuring your customers’ most valuable uses of your product are patent-protected (creating your own moat)
- Developing something that your competitors need but can’t access without infringing on your patent (laying the foundation for a “buy-vs-build” acquisition)
- Carving up whitespace in a domain that others missed or didn’t perceive as valuable (opening up a new market)
- Anticipating how technology will develop and planting your flag as a first- and fast- mover in the domain (speed to market)
2. Leverage
- Increasing your appeal to potential financiers, stakeholders, or customers by showing that you have something differentiated
- Verifying legitimacy and signaling credibility to outsiders
- Making execution of business objectives easier by reducing resistance
3. Selling/Licensing
While possible to sell or license a patent, it’s extremely difficult. By some estimates, fewer than 1% of patents break-even from licensing.
Consider what a prospective licensor actually wants: they’re not interested in the patent but in the underlying technology or product. The patent is interesting because of either the technology or the market potential. The patent itself is usually too early.
A prospective buyer of a patent may care if there’s “evidence-of-use” that your patent has been infringed and could purchase it to initiate a lawsuit. These types of buyers are called “patent trolls” and usually won’t come knocking unless your invention has achieved some degree of commercial success or another similar product achieved commercial success by possibly leveraging your patented invention.
4. Preventing Others from Commercializing
Your patent was granted and you now have exclusive rights, but what if others decide to copy your technology anyway?
Patent infringement lawsuits cost around $10 million and up. Enforcing your exclusivity rights are your responsibility as the patentholder.
There are instances where firms have done it aggressively and successfully and if this is your goal, you’ll need to be mindful of the following:
- What is the scope of your patent?
- What is considered infringement and what isn’t?
- How easy is it for you to detect infringement by others?
- Who is the infringer? (you shouldn’t sue your customers…)
- Can a potential infringer have my patent invalidated?
- Do I have the resources to pursue this course of action?
The Takeaway
Having a patent validates that your invention is unique and grants you exclusive commercialization rights. These rights only confer value to your business if the underlying invention also confers value. In other words, focus on your business plan and execute on your go-to-market. Leverage your patent to build your ecosystem.
Your patent will be most valuable to you when you succeed.
