Introduction
Patents grant inventors exclusive rights to their inventions/innovations for a limited period of time, allowing them to control how those inventions are used. This can serve multiple purposes, from protecting competitive advantages to generating revenue. Understanding how patents work, and how they can be strategically used, is essential for companies, universities, and individuals seeking to maximize the value of innovation.
Patents for Protection
Many companies invest heavily in research and development and patent their inventions primarily to protect their ideas from competitors. By securing patent rights, a company can prevent others from making, using, or selling the patented invention without permission.
Apple provides a clear example of this approach. The company frequently patents new hardware and software features and uses those patents to stop competing brands from offering the same functionality. This strategy helps differentiate Apple products and ensures that certain features are available only within the Apple ecosystem, increasing their appeal to consumers.
Other companies use patents differently, but still as sort of a protection. For example, Qualcomm develops and manufactures its own semiconductor chips, but also allows other manufacturers to use technologies covered by its patents through licensing agreements. Rather than excluding others entirely, Qualcomm actually wants others to use their intellectual property to ingrain that technology into the system, while still generating revenue from licensing fees. In this way, patents still provide protection, but they also enable collaboration and widespread adoption of the technology.
Patents for Monetization
Beyond protection, the patents themselves can be valuable financial assets. Some organizations hold patents primarily to monetize them, even if they do not manufacture products or offer services based on those inventions. The two most common methods of patent monetization are selling the patent outright to another company or collecting royalties through licensing or enforcement.
Royalties are paid by companies that need/want to use the patented technology in their own products or services, while the sale of the patent transfers ownership entirely to another entity for some price/deal. In both cases, the patent itself becomes a source of revenue independent of any physical product.
Lost Patent Potential
Despite their potential value, many companies and academic institutions, including universities, maintain large patent portfolios that are neither actively used nor monetized. These patents may sit unused and unrecognized for years, providing no return on the significant investment required to obtain and maintain them. This most likely occurs because many organizations lack awareness of the patent’s relevance over time, and may not understand the intricacies of patents enough to take action themselves.
Real World Example
A well-known example of overlooked patent value involves CoreLogic, one of the nation’s largest real estate data providers. In 2010, CoreLogic owned roughly two dozen patents but had never monetized them or even formally valued them. At one point, the company’s CFO asked an in-house patent attorney whether any of the patents could generate revenue.
Upon reviewing the portfolio, the attorney identified a patent that CoreLogic had acquired years earlier along with an automated valuation model (AVM). Notably, it was the first patent ever issued for AVMs. When the patent was originally granted, the technology had little practical use because the broader market for AVMs did not yet exist. Fifteen years later, however, AVMs had become standard across the real estate industry.
Now, 15 years after acquiring the patent after a random request by the CFO, CoreLogic enforced the patent against major real estate information companies and ultimately collected over $20 million in royalties through settlements, without even needing to win in court. This case highlights the everchanging value and application of patents, and how their most profitable uses are often difficult to predict, especially at the time of invention.
For organizations that own patent portfolios but are not currently monetizing them or want to spend the in-house effort to properly manage them, engaging a third party to evaluate the portfolio and identify monetization opportunities can be extremely beneficial. Firms such as GHB Intellect have extensive experience in this area and can find and determine whether there is a potential infringement using experienced high level people in their respective field based on the patent under review to accomplish this. Many firms work on an upfront cost/fee basis, however many also work on a contingency basis, meaning the company/inventor does not have to pay significant upfront costs and the firm will share in both risk and revenue.
Conclusion
Patents and their respective processes and uses are complex, and as a result are often misunderstood and underutilized. There are multiple ways to utilize a patent, and many unique goals a company can have with that patent. Patents can protect innovation, create mutually beneficial partnerships, and generate significant revenue long after the invention is created. By understanding the importance and purpose of patents, along with their potential uses, companies can make informed decisions through firms or similar resources to fully leverage their intellectual property.