Making The Business Case For A Patent

By russ.krajec@blueironip.com | February 2, 2026

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This is a reproduction of Investing in Patents by Russ Krajec. For the complete book, get it on Amazon.

Patents are business assets first and foremost. If the patent fails to add substantial business value, there is no reason to have it.

An angel or venture capital investor typically requires a 10x return on investment in 5 years. This amounts to a 56% year over year increase in company value. The assumption is that a startup CEO will invest capital to achieve this astronomical growth. Ideally, each expenditure should yield 56% per year growth or higher.

Consequently, an investor would like the money invested in a patent needs to produce that same level of return or higher.

The business value of a patent is not easily calculated. Sometimes, the mere presence of a patent can deter a competitor from entering a market, the value of which is impossible to quantify. The business value might be easier to quantify when a startup is able to negotiate with a supplier to trade some exclusive rights to the patent in exchange for an investment in capital by the supplier.

Some people view patents as merely an insurance policy that protects an investment from being copied by competitors. Some investors do not like insurance policies because in some ways they dilute the high risk exposure that they seek. These investors have a “burn the ships” mentality. Other investors see patents as mitigating excessive risks.

But patents offer much more than reducing risk.

Patents can have extraordinary value in multiplying an investment. This occurs when the company can stake out a broad landscape for itself and keep competitors at bay, when technology can be licensed to competitors and non-competitors, when inventions are spun out into new companies focused on a new vertical market or licensed into industry standards, or many other scenarios, including extracting technology from a competitor.

Well-designed patents can have a dramatic multiplying effect on the remaining investment in a company.

Good patents have enormous economic leverage. Consider that the cost to acquire a US patent averages $50,000 to $60,000, but the best of those assets can produce license fees (or verdicts in a lawsuit) of $500,000,000 or more over their lifetime. The secondary patent market is a good indicator: the average patent can sell for $200,000 to $500,000 or in the neighborhood of 3-10x their original cost.

However, most patents are worthless because they are researched poorly, badly written, not managed correctly, or suffer from a host of other problems. Most importantly, most patents are worthless because they are not aligned with a business purpose.

The underlying theme of this book: patents are only valuable when they match real business needs of a real company.

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