Myth: Patents Have Intrinsic Value

Why Revenue Is the Only Metric of Value

There is a deeply embedded myth in the startup, investor, and legal ecosystems that patents have intrinsic value. That simply owning a patent means you own “something valuable.” That belief is not just wrong — it is dangerously wrong. We have written before about this exact misconception in Patent Value – Revenue Is the Only Factor That Matters, but it continues to persist.

This myth pervades the entire patent ecosystem, from the USPTO actively pushing patents, the “inventor” community, to the angel/VC ecosystem. “Innovative” people want to believe that ideas have value.

They don’t.

Actions in the market has value. As we explained in How to Find a Realistic Patent Value, valuation only begins once there is actual economic activity tied to the invention.

A patent, standing alone, has no inherent value. Worse than that, it is actively harmful to a company until it protects a revenue stream. This is not a philosophical position. It is an economic and strategic reality.

When a company files a patent, it is not merely creating an asset.

It is making a trade: disclosure in exchange for a speculative future right.

That trade only makes sense if there is revenue to protect. Without revenue, the trade is lopsided. You give up certainty — your trade secrets — for the possibility of value later.

The idea that disclosure itself has value is nonsense. There is no inherent value in giving away your crown jewels for free.

Why Patents Are Harmful – Until They Protect Revenue

Before revenue exists, a patent is not neutral. It is not “waiting” to become valuable.

It is doing damage every day it exists. As discussed in Patent Descriptions: Every Word Hurts You, every claim and every embodiment teaches the world how your system works.

First, there is the obvious cost side. Filing fees. Attorney fees. Prosecution costs. Maintenance fees. These are real cash expenses that never stop. Even if you write your own patents, the government does not accept goodwill in lieu of fees.

But the cost side is actually the least important part of the problem.

The real damage comes from disclosure.

A patent does not vaguely describe an idea. A good patent explains exactly how your black box works. It teaches the world what you built, why you built it that way, and what problems you were solving. That information is not theoretical — it is operational intelligence.

You are publishing:

• the architecture of your system
• the constraints you identified
• the assumptions you made
• the design tradeoffs you chose

That is the hardest work you did as a founder or technical team. That thinking is the thing you should not give away lightly.

Once published, competitors can:

• improve it
• design around it
• change it
• implement alternatives
• wait for you to fail

And they can do all of that while you continue paying to maintain the patent.

Until revenue exists, the patent does not protect value.

The patent destroys optionality.

You no longer control who knows how your system works.

We have also seen this play out repeatedly in startups that later abandon their patents altogether, as discussed in Do Startups Give Up on Their Patents?. Once the cost and disclosure burden becomes clear, many founders realize too late that the patent never helped them compete.

That is why a patent without revenue is worse than worthless. It is an ongoing liability that weakens your competitive position.

When Patents Actually Have Value — and Why Revenue Is the Trigger

Patents only begin to have value when they protect a revenue stream.

Not enforcement. Not lawsuits. Not licensing fantasies.

Revenue.

Revenue can come in only two forms:

1. You are selling a product or service, and the patent protects that revenue.
2. Someone else is selling a product or service, and your patent could be asserted against that revenue.

The enforcement part is secondary. The revenue is the prerequisite.

In both cases, the patent derives its value from the revenue, not from the legal document itself. This is why speculative valuation models fail so consistently, as we have outlined in Avoid Wishful Thinking Patents.

Protecting revenue does not mean you are enforcing today. It means enforcement is even possible. A patent that does not map to revenue is unenforceable in any economically meaningful way.

Without revenue:

• there is nothing to license
• nothing to collateralize
• nothing to finance
• nothing to enforce

This is why patents are not assets in the abstract. They are derivative assets. Their value derives entirely from revenue that exists independently of the patent itself.

IP-Backed Loans: Why Revenue Is Non-Negotiable

This misunderstanding becomes painfully obvious in IP-backed lending.

We routinely receive inquiries from companies seeking IP-backed loans with no revenue. They believe their patents should qualify as collateral. They do not.

As explained directly in How Is the Value of My IP Determined for a Loan?, lenders do not lend against ideas. They lend against enforceable economic value.

A pre-revenue patent:

• generates no cash flow
• still requires maintenance and prosecution
• has uncertain enforceability
• exposes the company’s technical strategy

That is why we explicitly state in Is the Patent Loan Program Available to Pre-Revenue Companies? that revenue is a prerequisite. Until the entrepreneur creates the market, the patent has nothing to protect.

The patent does not create the business. The business creates the patent’s value.

Why “Great Patents” Without Revenue Mean Nothing

This misunderstanding shows up constantly in IP-backed lending.

Companies come asking for IP-backed loans with no revenue. They believe their patents should qualify as collateral. They do not.

From a lender’s perspective, a patent without revenue is not an asset. It is a liability on the balance sheet.

The company must still:

• pay maintenance fees
• continue prosecution
• respond to office actions
• fund legal upkeep

Meanwhile, the company has already disclosed the very information that might have created future value.

There is nothing to lend against.

The entrepreneur still has to do all the hard work:

• create awareness
• create interest
• create demand
• create customers
• create revenue

Only after that work is done does the patent have any relevance. The patent does not create the market. The entrepreneur does.

At that stage, the patent may protect the revenue the entrepreneur already built. Until then, the patent is simply a cost center that makes the company weaker, not stronger.

Two Very Different Patent Strategies People Confuse

There are two fundamentally different patent strategies that people routinely conflate.

1. Patents on the Business You Are Actually Running

This is the straightforward case. You file patents on the product or service you are selling. The patent may later protect that revenue.

Even here, filing too early still carries the disclosure problem. But at least the patent is aligned with an actual business.

These patents are only valuable when the focus on the core value of the business.

The easy way to think about this is “I want to capture the reason why someone bought your product.”

We don’t want patents on anything that the customer does not care about.

If the customer is price-sensitive, patents on features that reduce cost are important.

If the customer uses a certain feature of your software over and over, we want patents on that feature.

If the customer is willing to pay a premium for our product, we want to know why and we want patents on all the things that go into that decision.

We do not want patents on “great ideas” that are “cool” or “innovative.” The only thing we care about is what the customer wants.

2. Patents on a Business Someone Else Is Running (The “Patent Troll” Model)

This is where most of the fantasy lives.

The idea is simple in theory: file patents on technology you will never use, wait for someone else to adopt it, and then collect money.

In practice, this only works under extremely narrow conditions — and usually only for people already inside the industry.

The Patent Troll Model: Insider vs Outsider

The Insider Version (Sometimes Rational)

The best patents tend to come from people deeply embedded in an industry.

They:

• understand how decisions are made
• know where constraints exist
• see where competitors must go next
• understand the weaknesses of competing approaches

For these people, filing a small number of “offensive” patents aimed at a competitor’s path can make sense. They are not guessing. They are leveraging lived experience.

Even then, this strategy is expensive, slow, and uncertain. It only works because the person already understands:

• who the likely infringers are
• how revenue will be generated
• where enforcement pressure matters

The Outsider Version (Almost Always Delusional)

The outsider version is where the math collapses.

This is someone outside the industry guessing:

• based on trends
• regulations
• market forecasts
• hype cycles

They do not know:

• how real decisions are made
• what constraints matter
• what solutions are viable
• what competitors will actually build

To compensate, they must file hundreds or thousands of patents, hoping one hits.

This becomes prohibitively expensive very quickly.

Why the Math Does Not Work

Even under optimistic assumptions, the economics are brutal.

Assume:

• $20,000 per patent (fees + legal + maintenance) – which assumes that we are paying bottom feeder, low-quality patent attorneys or (worse) writing the patents ourselves
• 100 patents filed → $2,000,000 invested

Now assume a successful enforcement yields $5 million.

But that $5 million must be risk-adjusted.

You must discount for:

• patents being invalidated
• claims being narrowed
• design-arounds
• non-payment
• delayed litigation
• jurisdictional risk
• settlement uncertainty

On a risk-adjusted basis, the expected value collapses.

And that assumes:

• infringement actually occurs
• within the patent term
• by a company with money
• that chooses not to fight

Most patents never reach that point.

This is why contingency-fee litigators are selective. They know the math. They will not “pony up” unless infringement revenue is massive and obvious.

Without revenue, you cannot give patents away. You cannot finance them. You cannot rely on them.

The Reality Nobody Wants to Admit

Patents do not create value.

Markets do.

Customers do.

Revenue does.

Patents only become relevant after value already exists.

Until then:

• they cost money
• they expose secrets
• they reduce flexibility
• they weaken competitive advantage

That is why revenue is the only metric of value when it comes to patents.

Everything else is a hoax.