By Robin Bear of Robin Bear Consulting
Ask most inventors and founders why they doggedly pursue the long process of applying for a patent, and they may respond generally, “because it’s a good thing to have.” While a patent awards legal rights—along with an aura of accomplishment and a badge of honor—it can be worth much more to a young business than the ability to defend.
Gaining a deeper understanding of exactly why and how a patent can add value to a startup venture can lead to insightful ways to leverage your intellectual property and execute a proactive growth strategy for your new business.
Recent research measuring the impact of intellectual property rights has shown that a first patent for a new entrepreneur in a young company offers dramatic effects, even greater than subsequent filings. These fledgling businesses experience significant growth in revenue and jobs creation after winning patent approval.
New businesses with patents are also more likely to receive capital funding than companies without such documentation. Why? Because a patent provides additional, verified information about your technology claim. This reduces some of the risk of the unknown entity, especially for as-yet-to-be-proven founders, businesses operating in highly competitive geographic areas, or specific technical industries.
Patents offer value beyond the opportunity to defend your ownership of ideas. The intellectual property rights it grants can be monetized, transacted, and exchanged just like a piece of real estate. It can be collateralized for loans or serve as due diligence for venture funding. It can provide a way for an entrepreneur to reap the rewards of years of hard work by cashing out through an exit. A patent also can provide the technical basis for negotiating a licensing agreement or structuring a strategic relationship.
Each of these types of transactions can deliver tremendous value to a young company and should be considered as part of a proactive business growth strategy. Monetization and the extraction of value from ownership rights to intellectual property best occur when the right partner is identified and a custom relationship is purpose-built.
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