Patents Enable Innovation – not the other way around

Sophisticated companies view patents as *enabling* innovation, not as a result of it. This comes from a much more holistic view of IP protection.

Startups and first time entrepreneurs/inventors focus on “protecting” their investment in R&D through patents. This report highlights a much more sublime – and much more powerful – use of patents.

Clarivate issued their 2022 Patent Trend Report (behind an access wall).

The report highlights that patents enable further innovation, as opposed to just protecting existing innovation. This difference is striking:

From Clarivate’s 2022 Patent Trends Report

The myth that patents are for “protection”

The common myth is that you get a patent to “protect” your invention. Entrepreneurs, angel investors, and inventors world-wide believe that there is “protection” in a patent. If you have a patent, you are “protected.”

For companies just starting out, this is all we can hope to get.

We have a product, so we get a patent to keep competitors from copying our product.

Of course, you need to be able to enforce that patent. That means three things:

  1. The patent must be strong enough to survive litigation.
  2. The patent must be the single, best way to solve the customer’s problem.
  3. You must have the financial strength (or patent insurance) to financially survive litigation.

With 95% of all patents being worthless, there is a 1 in 20 chance that you actually have ‘good’ patents as a startup.

Further, many entrepreneurs – at the ‘advice’ of their patent attorneys – get patents far too early and far too broad. These patents wind up costing them in the long run.

Patents ENABLE innovation

One of my friends was a patent attorney at HP years ago. The goal of the patent group at HP was to “give engineers freedom to innovate.”

What he meant was that HP used their considerable patent portfolio to cross license with competitors, license to other companies, and -essentially- trade IP. This happened when the engineers and business managers needed to innovate in specific areas, especially competitive spaces where others had lots of patents.

Every big company with inhouse patent counsel looks at patents this way. This is because the inhouse counsel must live with the patents after they issue. They are concerned with what kinds of deals they can do once they have the assets.

At first glance, it seems counterintuitive that patents enable innovation, rather than protect it.

However, consider a small startup company who is negotiating a relationship with a strategic investor or supplier. When the startup company comes to the table with issued patents, they can negotiate much stronger terms than if they had no patents.

Or, think about all the pivots that startups (and big companies) go through with their product development cycles. These pivots often throw off patents that were appropriate for the product they were developing at the time, but might not fit the company’s roadmap any more. Selling or licensing these IP assets help recoup the costs of the pivot – but also allow the company to trade or “cross license” their IP with companies who have innovations that the company can leverage.

Patents are 20 year assets – think about them in those terms

Every business is focused on the next step or two. This might be launching the next product, landing the next customer, or getting to the next milestone set by an investor.

It is easy to get lost in that mindset and forget why we get patents.

We get patents so we have business assets that we can use in the future.

In many cases, it is hard to articulate exactly how the patents will be used over the next two decades. We cannot foresee that a competitor will want to take a license to today’s innovations, nor can we foresee that we might be able to pool our patents to establish industry standards.

Patent strategy requires a much longer view than just this fiscal year or our next product launch. They are a strategic asset that can enable much larger and more meaningful business transactions in the future. Each patent is one more asset that makes us stronger.