Business Case for Patents

Price Sensitivity to Patent Preparation and Prosecution

I had occasion to discuss pricing schemes with another practitioner last week, and I think it is a very interesting topic.

The value delivered by a patent practitioner should, under normal circumstances, far outweighs the costs. If a single invention is generally worth patenting, it should potentially generate hundreds of thousands, if not millions and millions of dollars. This is more true for the small startup company where the largest asset is one or two patents covering the core idea, as opposed to the very large corporations who have portfolios of thousands of patents. The same holds true for independent inventors with ideas that are commercially viable.

Given that an inventor has a potential of reaping millions of dollars from their invention, does the price really matter for the patent?

Debunking the Myth that Patents Are Expensive

When a company considers protecting a product, be it a software program, mechanical device, or other product, the strategy must make good business sense. It is certainly possible to spend vast sums of money on large downtown patent firms and file many international patents, then spend virtually endless amounts of money litigating with infringers, but there are other alternatives.

The Submarine Strategy

The submarine strategy is a valid business strategy that lets the market for an idea develop before a patent is asserted. This is one of the riskiest strategies, but has the corresponding payoff. There are legal risks as well as business risks, and this strategy tends to have the largest costs as well.

In this strategy, the patentee seeks to cover technology that will become commonplace in the future. Rather than asserting the patent right away, the patentee may keep the patent quiet and let the market develop for the technology. The patentee hopes that the technology will become widely used and a ‘standard’ in the industry. At this point, the patentee may begin asserting the patent against one or more infringers.

Offensive Development and Licensing of a Patent Portfolio

One or more patents can be developed for a licensing strategy in conjunction with or separate from a company’s main product.

There are some technologies that are so large that one company may not have the resources to bring the technology to market or where the developing company does not have the interest in fully exploiting the technology.

In this strategy, the patent portfolio is developed with an intent to offer a licensing agreement to one or more other companies, presumably for royalty income.

Offensive Protection of Marketplace

A very common use for patents is to enforce those patents against infringers in the marketplace. This strategy can be much more complex and risky than it seems.

In the simplistic view, this patent strategy involves protecting the products of the business by writing patents that cover the key elements of a company’s business. These patents serve as roadblocks for potential competitors and are designed to make a competitor go a long way to design around a product.

This is the classic patent strategy.