How Do Patents Grow Company Value?

What do writers who reference Samsung and Apple in the same article have in common? They’re likely recycling speculative hearsay on the latest battle of the infamous “patent wars”. But through the midst of a journalist’s poor understanding of a highly technical area of our laws, there are at least two undisputed facts that don’t require a J.D. and two bar exams to understand: the expenses of patent litigation can be in the millions of dollars, while the rewards of patent litigation can be the billions. Media’s portrayal of corporate giants and their astonishing successes (or failures) often lead the small business CEO to believe that the world of intellectual property (IP) is uncertain, unattainable, unnecessary, or, worse, reserved for big business – misconceptions this article hopes to dispel.

Big or small, nearly every business has a nucleus of intangible assets on which it relies to prosper in the face of capitalistic competition. In today’s economy, intangible assets, including IP, constitute nearly 80 percent of corporate value (up from 68% in 1995, 32% in 1985, and just 17% in 1975). The other 20 percent includes physical and financial assets found on a typical business’s balance sheet. What can a small business CEO looking to add to the valuation of their company learn from this statistic? Don’t undervalue your company’s IP – start identifying, protecting, and leveraging your company’s IP portfolio now.

 

For those entrepreneurs who have not yet attained any physical or financial assets, your intangible assets (for instance, the business model or prototype you’ve spent months developing) may be the sole factor in determining your company’s value. At this stage, any partners or investors you intend to work with will look to see if you have sought to protect your only asset. In turn, this protection provides a sense of security for your investor and shows them, from the first impression, that you understand how to run your company in proper order. Don’t believe me, take a look at the statistics: a simple ‘patent pending’, that costs your $65 to file.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

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