I am often asked ‘are patents expensive?’ or ‘why do patents cost so much…?’. We tend to think of things as ‘expensive’ if we deem the cost to be more than the perceived value we receive in return. So, patents are really only ‘expensive’ if the true value of it is unknown and often hard to quantify.
Patents have become increasingly valuable to innovative companies. In simple terms, if you have developed something technically new and innovative, a patent would enable you to stop others from being able to incorporate the same technical innovation in their own products. This technical innovation can be anything from a small technical improvement on an existing product, to a ground breaking or disruptive technology, and if it would be valuable to your business to be able to stop your competitors from doing the same, then it is worth considering patent protection.
Of course, if you discover someone infringing your patent rights, and you successfully take legal action to stop them, then the value of the patent is self evident. Similarly, if you license a patent to a third party for a license fee or royalty payment, then again the value can be quantified. But it is well known in most tech industries that patents are expensive to infringe, and only the most unscrupulous (or misguided) companies will knowingly infringe another’s patent. This deterrent effect is one of the ‘hidden’ benefits of a patent, but it is almost impossible to quantify, so its value is often underestimated. Nevertheless, this, and of course any applicable Patent Box benefits all contribute to the overall value of having patent protection.
Simple Cost/Benefit Analysis
If we think of this issue purely in terms of figures, what do you estimate would be your loss of revenue if your biggest competitors could simply copy your USP(s) and offer the same product (perhaps at a lower price because they would not have had the same overheads in developing the ideas), bearing in mind that they probably have an existing route to a market that you would (ideally) like to take a part of with your own product?
The answer is, in effect, at least part of the value of any patent rights that will allow you to stop them from doing that.
Having arrived at some nominal figure for this value, you can assess the cost of securing those patent rights against that value. If the former is less than the latter, then surely it’s the opposite of ‘expensive’? A bargain, even?
And that’s without considering the potential tax savings via the Patent Box scheme and the hidden value of patents – value you may never even realise you have received.
Hidden value
A robust IP portfolio can add untold value to a business. And IP rights represent tangible assets that are often imperative when looking for funding, either by borrowing or investment. Not only that, but it sends a clear message to your competitors that you value your IP and will enforce it if you need to.
Don’t forget the deterrent power of IP
As mentioned above, it is difficult to prove a negative, so you may never know whether or not a would-be competitor was put off copying your innovation because you had patent in place. In general, a legitimate business will not knowingly risk lengthy and costly legal proceedings for patent infringement. So, if you have a patent and show a commitment to enforcing it, then it will likely act as a powerful deterrent to others who might otherwise try and muscle in on your market share.
So, are patents really ‘expensive’? Or is it just that the cost of getting patents seems high because much of the value is potentially hidden?
Need Help?
If you have any questions about patents or need any other IP advice, please contact us for a free initial consultation by emailing vicki.strachan@strachanip.co.uk or visiting our website at https://strachanip.co.uk/contact/. Alternatively you can use this link to schedule a mutually convenient time to speak: https://calendly.com/strachan-ip-a-fresh-view-of-intellectual-property/30min
