Why Companies Obtain
Studies have shown that
the corporate objectives that motivate companies to obtain patents
are remarkably consistent across large, medium, and even many small
enterprises.* These include acquiring patents for:
term competitive protection means obtaining patents in order to
prevent others from making, using, or selling the company’s innovations.
This is the traditional view of patents.
freedom means obtaining patents in order to create
conditions for cross-licensing with competitors. In architectures
which depend on standardization and inter-operability, patents
are needed not to exclude others from using the company’s technology,
but to license its use by others.
avoidance, means acquiring patents for use in defensive
legal actions. A portfolio of patents can deter companies who may
have exposure from their own activities from initiating legal actions.
In establishing alliances and joint ventures patents
represent something “tangible” to contribute. Having patents also
enables the parties to identify what is being contributed - and what
is not. Patents provide companies control over how their technology
In just the past five
years, there has been an unprecedented emphasis on patent licensing.
Many companies now see their patent portfolios as a source of cash
income. The conflation of this phenomenon with the creation of new
capital markets pumping liquidity into patent assets is slowly changing
the rules of the game. The basic corporate objectives identified above
might now be expanded to include:
Generating royalty income from patent licensing. Everybody’s
Obtaining patents to attract and secure investment capital. Venture
capitalists, private equity managers, and other investors are increasingly
interested to see that their investments will be secured by a portfolio
of patents. For so-called “knowledge companies” like Mobeon, patents
(and other IPRs including trademarks and copyrights) are often the
only “tangible” asset there is to secure investors’ money. The possibility
to monetize these assets through licensing or through one of emerging
IPR capital markets offers the promise of significantly lower risks
These are the typical
reasons why companies obtain patents. Beyond gross oversimplifications,
however, each is very difficult to assess quantitatively. How does
one place a value on “design freedom”, for example? Business managers
have to be careful: patents are very easy to over-value; it is important
that the “objectives” do not become excuses for spending lots of money
obtaining patents. Like any other business investment, the investment
in obtaining patents must result in a tangible and positive return.