1. To protect a competitive advantage
By preventing others from entering a market or using a specific technology, a monopoly can be obtained with patents. Thus a patent portfolio becomes a business insurance against infringement, abuse or technological piracy.
2. To increase value of your business
Because of an obtained monopoly, higher margins can be generated, leading to higher profits and a higher company value. Patents can simply help in generating a higher return on investment.
3. To increase credibility of your business
By filing patent applications, there is some evidence of a technological progression in your company. This can help attract higher skilled staff and can convince potential clients that you are advanced and innovative. Thus you are likely offering them state of the art service, leading them to have a competitive advantage as well.
4. To enhance your power in negotiation
In mergers or takeovers, a patent portfolio represents additional value, especially when the underlying products or services are commercialized. A party with a portfolio is being taken more serious by competition. Competitors will rethink copying and forcing you out of the market, when there is a risk of legal procedures. A takeover or merger is a more likely option.
5. To raise licensing revenue
By licensing out technology, passive income can be generated, with relative low expenditure of resources, such as production facilities, distribution facilities and aftersales. Licensing partners may have far superior resources, which can be used to the advantage of both licensing partners. Licensing contracts can be made with non competitors in various different fields or even with competitors in the field of business the patent holder is active in.
6. To convince investors to invest
It is a great advantage if the technology at stake is protected, so that higher value can potentially be generated. Especially granted patents present a proof that the technology can be monopolized. For start ups, the existence of a patent portfolio can even be the essential feature for attracting investors and can be instrumental for the survival of the company.
7. To obtain a positive image of your business
Patents are still seen as a high value publication, and can be used as a marketing tool, both for innovative aspect as well as for a perceived level of quality. Your patents portfolio is a strong indication that your business delivers state of the art products or services.
8. To improve defense against infringement cases
In infringement cases, if the infringed portfolio can be more powerfully countered with an own portfolio. It makes a cross license deal more likely and greatly enhances the chances of avoiding any verdict to pay damages. “If you sue me with your patents, I will sue you with my patents” is a wonderful medicine against over aggressively litigating competition.
9. To promote innovation among employees
If there is a patent policy in place, employees are given some incentive to innovate and apply for patent protection. This can be -an often underestimated- aid in boosting personal scientific publication strength of employees and in honoring the inventors. Thus patents can provide a considerable intangible value for staff engagement.
10. To reduce profit taxes in innovation stimulating fiscal regimes
A number of tax incentives are provided for innovative industries. In most cases tax authorities accept granted patents as a valid proof of innovation.
11. To prevent others from protecting specific technologies
For a considerable number of companies,this is the main reason to pursue patent protection. However it actually does not lead to a very profitable, society contributing business. Numerous industries hoard patents, and sit on them doing nothing. In most countries however, “non usus clauses” prevent this practice from being very successful, except in the USA, where “non usus clauses” are absent in patent law. Thus, non-producing entities (NPE’s) with huge patent portfolios, are very much a US-phenomena. NPE’s mainly dominate the US-market and are rarely seen in e.g. the European countries.
Since this last reason reflects an objective to hinder someone else rather than to progress ones own business, it is placed where it belongs, outside the top 10.
I wish you all happy inventing!
Hendrik de Lange
Dutch and European patent attorney.