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Why does an investor love patents? 

By Prayank Khandelwal and Muskaan MandhyanFebruary 9, 2023February 10th, 2023No Comments
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Are you trying to figure out why investors value patents? Intellectual property is undoubtedly one of the most valuable assets today, and it’s no wonder that investors are constantly on the lookout for companies with strong patent portfolios. But precisely why do patents hold so much appeal to investors? In this blog post, we’ll explore the key reasons why an investor loves patents as well as how having a robust patent portfolio can be beneficial for your business in numerous ways.

Why does an investor love patents? 

#1 The worth of a company’s IP is infinite.

Intellectual property, in contrast to most other asset classes, can theoretically expand in value indefinitely. In contrast, the value of a factory owned by a firm is static and, if anything, will likely decrease with time. The machinery and other equipment for manufacturing frequently need fixing, servicing, or replacement. Companies need intellectual property to safeguard their existing value (in the form of their trademarks, innovations, and designs) and to create new value.

Patents are an important asset to any investor. They provide the investor with a competitive edge and the potential to generate significant returns. Patents are a form of intellectual property that protects an invention or technology from being used by others without the inventor’s permission. By securing a patent, an investor can protect their invention or technology from competitors and increase their return on investment.

#2 Capitalisation through intellectual property 

Many smaller businesses rely heavily on licensing for income. We represent a large number of new businesses whose core strategy is based on monetizing their intellectual property by licensing it to others. However, due to the low overhead, licensing can be an effective strategy for new businesses as well. There is no need for a well-known company to license an idea if the technology itself is sound and legally protected by a patent. The value of a company’s IP portfolio can be used as collateral to secure various forms of financing.

When resources are allocated to the creation and defense of intellectual property, there exists the possibility of multiple returns on the initial investment. Similarly to the sale of physical assets, intellectual property can be traded.

Patents also provide investors with a long-term source of revenue. Patents can last up to 20 years, meaning that the investor can generate long-term returns from their invention or technology. The investor can also license the technology to other companies or organizations, providing them with additional revenue. 

#3 Lowers risk 

Patents and other forms of intellectual property are awarded based on who files for them first (whoever protects it first gets the rights). You can prevent competitors from gaining an advantage in key markets by securing trademark protection there. Changing the name of a brand, even in just one country, is a major undertaking, especially when considering the potential loss of promotion dollars. Any business with such a threat hanging over its head is less appealing to investors.

Investors appreciate intellectual property rights because they provide a foundation for rapid and widespread economic expansion by safeguarding a company’s brand, invention, and design in key markets.

#4 Increases reliability as a brand 

It’s difficult to take a firm seriously if they don’t care about safeguarding its investments (branding, ideas). Partners (resellers, distributors, etc.) are likewise put in a tough spot if intellectual property isn’t protected. For instance, if there is no way to stop infringing products from being offered for knockoff pricing, a reseller may not be very motivated to be a partner. 

#5 Acts as a safeguard against competitors 

Patents also provide investors with exclusive rights to the technology or invention. This means that competitors are unable to use the same technology or invention without the investor’s permission. If a competitor does try to use the technology or invention, the investor can take legal action to stop them and potentially receive financial compensation for the infringement. 

#6 Brand recognition and visibility 

Patents can lead to increased brand recognition and visibility. By having a patent, an investor can show potential customers, partners, and investors that they have a legitimate product or technology that is protected by law. This can be a powerful marketing tool to help an investor stand out from the competition. In summary, patents are an important asset for investors. They provide the investor with exclusive rights to an invention or technology, a long-term source of revenue, and increased brand recognition and visibility. Investing in patents can be a lucrative and rewarding venture, and is one that investors should consider.

Bottom line 

You should probably get patents on any advances that can be patented before approaching investors. Having more information available is always preferable when trying to convince potential investors of the worth of your intellectual property. The more patents you have, the better off you are thought to be in the eyes of the public. Taking precautions to safeguard your discoveries demonstrates that you mean business and intend to make a profit. A genuine dedication to innovation can set your start-up apart from the many others competing for investors’ attention.

The love for patents is a love for exclusivity and profitability. With a patent in hand, investors can enjoy the sweet taste of being the only one in the game, able to reap the rewards of their innovative ideas. In a world where competition is fierce, patents provide a protective shield, keeping rivals at bay and allowing investors to dominate the market. And let’s not forget the added bonus of using patents as collateral to secure loans and investments. It’s no wonder why patents are so important in the investment world.

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Muskaan Mandhyan
Photon Legal | Website | + posts