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Why are patents so important?
Chris Baxter
Chris Baxter

Getting a patent isn’t easy. It’s a long, complicated and expensive process, and without the right support it can be a real headache.

So why bother? What’s so important about a patent that makes it worth all the hassle?

What’s in it for your business?

When you gain a patent over your invention, you get monopoly rights over the technology, process or system you have invented, in a specific market, for up to 20 years. This exclusive right to make money from your invention has very obvious value, provided that you have a viable plan to transform your idea into profits – either by manufacturing and selling it yourself or by licensing it to others and collecting royalties.

For many companies this monopoly is the primary reason for seeking patent protection, and provides a solid foundation for business success. However, a successful patent application can have many other advantages for your business.

Increased attractiveness to investors

If R&D is a big part of your business, your success in gaining patents over your work will send a strong signal to investors that you are worth their attention, potentially making it easier to attract funding for further research. Building a strong IP portfolio over time can be an important strategic step in the growth of your business, allowing you to extend your investor base and gain the resources you need to embark on larger scale projects.

Similarly, startup firms based around patented technology tend to be far more attractive to venture capital investors than those without patents – and for good reason. A report published in June 2014 by prominent French engineering school MINES ParisTech found that startups which held a patent were between 2.5 and 3.6 times more likely to be successful within 10 years than those that did not.

Higher company valuation

Whilst it can be difficult to place a direct value on a patent, especially before the technology has been developed and successfully commercialised, a strong and relevant patent portfolio can have a significant impact on a company’s valuation.

For evidence of the powerful impact of patents on market value, you only have to look at Perth-based regenerative medicine firm Orthocell, whose share price rose more than 30% earlier this month in response to the grant of a US patent for their ground-breaking ‘cell factory’ technology.

Meanwhile, the news that a patent had been granted to Apple for a wearable action camera caused shares in GoPro, the current market leader in that sector, to drop by almost 15% – this despite there being no immediate plans announced by Apple to develop or launch a product to rival GoPro’s range.

Competitive advantage

Even if you are not planning to develop and commercialise your invention, a patent can stop others from creating a product that may compete with your existing portfolio, effectively blocking competitors out of your market and protecting your profitability. A strategy like this might have spared GoPro the pain of Apple’s action camera gambit…

Of course, the patent system isn’t just valuable to individual businesses – it has strong benefits for the wider community too, by encouraging progress and innovation. Patents provide essential protection, enabling companies to recoup the resources poured into the research and development of medicines, processes and technology that ultimately help everyone.

Robust protection and effective commercialisation are the keys to getting value from your IP. For expert, strategic advice on protecting and profiting from your invention, call us at Baxter IP today.

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About the author
Chris Baxter
Managing Director, Patent & Trade Mark Attorney
Chris Baxter is a Sydney patent and trade mark attorney specialising in software patents, computer patents, medical device patents and engineering patents.

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