Intellectual property rights and company value

A patent is the right to prevent or exclude others from selling or manufacturing the invention, so the patent holder has the exclusive right to the technology and methods described by the patent. Patents can be used to create a virtual monopoly. A company that succeeds in creating a significant patent portfolio within its own field of business can achieve must greater value than simply its assets or turnover. The company can benefit from the global growth of the entire business sector.

Companies owning a good patent portfolio can grow internationally by licensing its technology for global markets. In other words, the company can become international even if it continues its original operations in its home market alone.

By contrast, a lack of intellectual property rights can prove to be overwhelmingly expensive for companies attempting to grow internationally, as all their product ideas and innovations can be copied free-of-charge by competitors. There is no law to protect ideas.

Intellectual property rights are also useful when negotiating financing. The risk to the financier is significantly lower if the company can present existing intellectual property rights and plans to acquire further rights.

Company decision-making

The IPR system can be employed as a key tool for companies to define their own territory in the market and to acquire information about existing products and competitors. Intellectual property rights can also be a threat. Neglecting the intellectual property rights belonging to others can pose a serious threat, especially to a company’s international operations.

Patent publications are an important source of information. Patent applications are often published before any actual product is launched. Patent publications offer the chance to see what kinds of new features will be offered on competitors’ products and how they are protected. Similar information is not available anywhere else. Companies can utilise this information to hone their own IPR strategies.

Intellectual property rights and R&D

Research and development involves refining ideas into products. Companies strive to develop products that are in some way better than products already on the market. New products may be cheaper, longer-lasting or simply solve a given problem better than existing products

The difference between new and existing that is created as a result of R&D usually has to be protected by intellectual property rights.

Redundant R&D

Before initiating R&D activities, it is important to be aware of the product’s intellectual property environment. The worst case is for a product to be fully developed and introduced to the market before noticing a patent infringement. The later the discovery is made, the greater the damage will be to the company.

Investing in ultimately fruitless R&D can be fatal for companies. Few are ready to admit their mistake and withdraw their product from the market, even when it clearly infringes on a competitor’s patents. Companies prefer to solve the dispute in court. An unfavourable verdict is likely to prove a deadly blow for a high-growth company.