Five Ways Patents Provide Value

Patents mean big money, in more ways than one. They cost a lot to acquire and keep up with maintenance fees. However, they can also bring big value to a company. As a result, companies continuously try to build their patent portfolios via applying for them or buying them from other companies. In fact, Lenovo, a leading personal technology company, recently bought 21 patent families for $100 million. Such purchases will continue as patents prove to bring great value to companies.

1. Keeps competitors at bay. Competitors have a harder time competing with companies that own patents in the same field. This is because patent owners can prevent competitors from entering the market with a similar product, due to risk of infringement.

2. Allows for competitive pricing. Patent owners can charge much more for a product than other companies. Since patents protect inventions that are unique by nature, this means that patent owners have a product like no other. Therefore, they can command a higher selling price since no other company is likely to have the same product without infringing.

3. Positions inventor/owner as market leader. Patents position companies as leaders in specific fields. For instance, pharmaceutical and technology companies often command superiority in particular areas. As a result, most consumers can name the top pharmaceutical companies and technology companies. These companies represent brand names such as Lipitor, Nexium, iPad, and Galaxy. When companies such as Pfizer, AstraZeneca, Apple, and Samsung position themselves as market leaders, they create customer loyalty.

4. Sets foundation for future improvements. Companies that own patented products can continuously tweak those products and command higher prices. Thus, many smartphone companies frequently introduce slightly newer versions of their smartphones, tweaking them slightly by building off the first version. As mentioned earlier, market leaders create customer loyalty. Therefore, a customer who purchases an iPhone is likely to continue purchasing newer versions of iPhones rather than switching to an Android or a Galaxy.

5. Provides protection in event of lawsuit. With the increase in patent lawsuits, owning patents provides the best protection in the event of willful infringement. Patent owners can receive up to treble damages in such cases. This is why companies scramble to boost their patent portfolios. Patent lawsuits are becoming commonplace, and the best safeguard is to own patents.

As noted, patents represent big money. While they may cost a lot to acquire and maintain, gaining major traction in competitive industries as well as providing protection in the event of a lawsuit make patent ownership worthwhile.