Can You Patent Software Or An App? Here’s What You Need To Know
Discover What Can Be Patented And What Cannot When Considering Software Products We are often...
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The key factors that determine whether a patent becomes a valuable business asset.
All intellectual property (IP) owned by a company counts as an asset for that business. Companies who create and protect their IP are adding to their balance sheet value and creating and protecting assets that provide long-term value for the business. A handful of patents are worth large sums of money, but many have little or no value.
Generally, value comes from the economics of the protected invention and the market in which the business operates. Understanding the valuation side of IP is key to getting the best out of the patent system. Capturing valuable IP provides significant long-term benefits.
A patent is only as good as the product or service protected
A patent protects an invention, not a market. A perfectly valid patent covering a product that nobody wants will have negligible value. Conversely, a patent protecting a feature that customers want can underpin an entire business.
The main question is therefore not whether an invention is patentable, but whether the invention will protect something that potentially has good market value.
Many patents protect incremental improvements to existing products or processes, but that improvement can be a key market development that potentially has huge value underwritten by the invention.
A new idea does not have to win the Nobel prize to have commercial value, seemingly small changes can be very valuable in the long run, if they are protected by patents.
The best patents create a barrier or moat
A granted patent should create a barrier around the new idea or enhancement that is the subject of the patent.
Something that is new and an improvement can be protected by a patent. It is important that the patent gives the best possible coverage of the invention.
Investors will tend towards the question: ‘If this patent didn’t exist, how much easier would it be for competitors to copy the business?‘ If the answer is ‘not much’, the patent may have little strategic value.
The focus of any patent activity should be the protection of a present or future commercial advantage that can create a barrier or moat protecting the market for the product or service.
The scope of a patent is important
Inventions can be claimed broadly or narrowly, depending on the scope of the patent claims contained within the patent.
Broad claims can look impressive, but broad claims that are able to survive the search and examination process and any subsequent third party challenge are more valuable.
Many patent applications begin broad and end up much narrower when granted. This isn’t necessarily a bad thing. However, it is important to understand whether the granted patent still has the same potential value that was perceived at the start of the process. Nevertheless, a narrow patent that protects a valuable commercial advantage is still a valuable asset, and still adds value to the business that owns the patent.
Geography matters
A patent covering the United Kingdom alone may be entirely appropriate for one business. For another, protection in Europe, the US, China and Japan may be essential.
Patent value depends partly on whether the patents cover the markets where competitors actually operate.
Most businesses will file in their home territory first, but then 12 months later they must decide which foreign territories they also wish to cover.
The G7 and G20 countries are the most popular for obvious reasons, but value for money must also be obtained.
A small yet focused set of countries often provides the best cost versus benefit analysis. It is therefore important to know your markets and know your competitors.
Enforcement
A patent is not self-enforcing.
Owning an excellent patent without the resources or willingness to enforce the rights may significantly reduce the real or perceived value of the patent.
Sometimes the deterrent effect of the IP right alone is enough. Sometimes litigation becomes unavoidable. However, generally speaking, a patent will only be infringed by others if the invention that is protected has good commercial value.
This means that the business that owns the patent should also be making good money from the invention and therefore should have the resources to be able to defend the right.
Portfolios are greater than the sum of their parts
The vast majority of valuable businesses do not rely on a single blockbuster patent. Instead, they build portfolios covering a wide variety of different aspects of their business.
This could include the core technology; manufacturing methods; improvements; implementation details; complementary products; and future developments which could include speculative ideas.
This makes it much harder for competitors to design around the technology and provides a portfolio of IP around the core business and around the commercial reality.
A portfolio of patents does not live or die on the success of one patent but builds synergistic value through the different elements protected by the patent portfolio to the long term benefit of the IP owner.
Final thoughts
A patent is not an asset simply because the patent exists.
A patent is an asset because the IP gives a business a meaningful competitive advantage in a market that customers value.
This is why some patents are worth millions, while others never justify the cost of filing.
Those businesses that successfully build a patent portfolio add significant value to their balance sheet and to their bottom line.
