5 reasons why you need a patent strategy

This article first appeared in the Evening Standard’s London Business Guide, April 2024.

 

If you’re a tech business without an effective patent strategy, you’re inviting your competitors into your hard-won space.

 

Did you know you don’t automatically own your innovation?  That’s why you need a patent strategy to secure the investment made in your business. Patents will help you stop competitors from making a product or using a process covered by the patent for a period, so you can maximise the return on R&D investment.

 

An effective patent strategy supports and enhances your business strategy, emphasising value-for-money and a patent budget that is proportionate to your R&D expenditure, investment, and technology-derived revenue streams.

 

An effective defensive patent strategy delivers tangible business benefit:

 

1. Your deterrent effect

A published patent portfolio can deter third parties entering your market.

 

A patent application is published 18 months after initial filing. So you benefit from up to 18 months of secrecy provided you maintain the confidentiality of your invention, and subsequently the deterrent effect arising from publication.

 

2. Your IP currency

Patents play a defensive role in a competitive space as leverage or ‘IP currency’ in negotiations.

 

A common example is cross-licencing or stand-off negotiations with competitors with their own patents. If both parties have their own patent assets, this can level the playing field. Patents can also be useful in negotiating commercial partnerships.

 

3. Your value uplift

An effective patent strategy can increase the value of your technology at every stage in your company’s lifecycle, from seed round to exit. Don’t forget Microsoft’s $8.5 bn acquisition of Skype; the valuation likely influenced by the 50 patents acquired in the process. 

 

Patent assets play an increasingly diverse role in fundraising. Studies show that the odds of obtaining funding increase significantly for startups with patents. And in debt financing, patent portfolios have played a role in securing billions in credit from institutional lenders. 

 

4. Future-proofing your business

A patent application must be filed before the invention enters the public domain in any way. So a forward-thinking strategy is vital.  

 

A significant practical consequence is that you must make a decision about whether to apply for patent protection before you know the full value of the invention.

 

Confidential information and ‘trade secrets’ play a role in protecting ‘backend’ tech, but in practice it is hard to maintain these rights beyond an initial ‘first mover’ period and they do not protect you from independent derivation by third parties. In AI, regulatory changes (such as the EU AI Act) may also put pressure on companies to disclose details of their technology in the future.  

 

A robust patent strategy considers the current state of your business and its projected future path.

 

 

5. Your badge of innovation

Patents demonstrate credibility to the outside world and give you the freedom to publicise your technological innovation. This can help in acquiring new business, fundraising, and recruitment and staff retention.

 

A patent program that recognizes and rewards technical innovation can attract and retain talent, particularly in competitive employment markets.  In some sectors (such as AI), researchers entering industry from academia increasingly prioritise freedom to publish academic papers or present at conferences. A patent filing strategy can support this, supporting such activity without giving away your technology for free.

 

This briefing is for general information purposes only and should not be used as a substitute for legal advice relating to your particular circumstances. We can discuss specific issues and facts on an individual basis. Please note that the law may have changed since the day this was first published in April 2024.