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Invention and Patent – Reasons for patenting an invention

1. Competitive edge, market power and earning more money

When you are able to use a patented invention embodied in a technology in your business, it is likely to improve your market power, provide  your  business  with a competitive edge, and help you to make more money.

A patent provides protection when you disclose your invention publicly. For example, it would enable you to go to a fair, exhibition, or an industry trade show and display it without  fear.  It  also  enables  you to go to a  wholesaler  or distributor and say with confidence that no one else in that market is allowed to make, sell, use or distribute  your  new  or  improved  product  without your express approval. This may either diminish, or eliminate competition. If that happens there would be typically increased sales, and if marketed properly, you may be able to charge a higher price because your competition is barred from offering an equal product. So, whenever you are able to use a  patented  invention  embodied  in  a  technology  in  your  business, it is likely to improve your  market  power,  provides  your  business with a competitive edge over competitors, and help you to make more money.

2. Add New Revenue Stream

You may be able to add a new revenue stream by licensing a patent, or better still, a portfolio of your patents.

3. Raise funds and attract potential investors

a.   Patents may be bought, sold or licensed.

b.  Patents may also serves as collateral for bank loans.

Patents may attracts potential investors to your company, as they are happy to see some type of barrier to entry for competitors,  which  may  not  only  protect your investments in R & D and, thereby, improve the return on your investments, but also may provide income through  licensing of your patents to others.

Most venture capitalist, investment bankers, financial analysts, and other investors favorably recognize the value of a patent.

4.Bargaining Chip for Securing “Freedom to Operate

A patent application, a patent or a  portfolio  of patents,  is  not  only  an  asset  for earning licensing revenue, but it is also often a valuable trading or cross‐licensing asset if your patent is faced with a dominating senior patent and/or complementary patents. It can also be used as  a  bargaining  chip  during licensing negotiations with a competitor or when you are accused by another of patent infringement. Generally, when such negotiations result in a stalemate, the two sides agree to  cross‐license  their  patent  portfolios  to  each other, with little or no need for exchanging money.

So, a company, such  as  yours,  may  wish  to  obtain  patents  simply  to  defend itself against your competitor's patent portfolio, even though you may    not want to take,  or  be  capable  of  taking,  any  offensive  action  by  relying  on your  patent  portfolio.  In other words, it  improves  your  freedom  to operate in the marketplace. The principal goal of a defensive IP  strategy should be to obtain the freedom to market planned products. This process requires the identification and neutralization of any patent infringement risks.

5. Selling the invention

Having a patent means you have a tradable asset which can  therefore  be sold. Generally, a large company will not  agree  to  even  talk  to  you  unless one or more patents protect your technology or at  least  you  have  filed  a  patent application to  protect  your  invention. It  could  be  that  your  talks  with a potential buyer end in failure.  If  that  happens,  you  may  need  a  way  to  stop such a party from stealing your idea, especially if a confidentiality  agreement had not been signed or, even if such an agreement  had  been  signed, if the other party acts in breach of it. Having a patent and thus the right to exclude the others enables you to take preventive action

6. Strategic Partnerships, Mergers  and  Acquisitions,  IPO,  and  Higher   Sale Price

A patent or  a  patent  portfolio  may  provide  substantial  value  for  entering  new markets through strategic partnerships, or in  mergers  and  acquisitions, and for getting a start‐up company listed on the  stock  exchange  through  a good initial public offering (IPO) or for getting a higher sale price of an established company.

In fact, one of the most valuable assets that a  technology  company  could  have is a portfolio of patents consisting of patents that may  be  owned,  co‐owned or licensed from others.

7. Convoyed sales

When a customer goes  to  a  shop  to  buy  one  item,  he  often  ends  up  buying other related items. Similarly, when a customer is attracted by a patented improvement of a product, increased sales of non‐patented articles may follow. This happens when the patented product  is  a  component  of  a more complex product or the patented product  is  sold  in  association  with  other products. These types of linked sales are known as add‐on, collateral, derivative, follow‐on or convoyed sales.

8. Basis for Recognition and Rewarding Employees

A patent allows you to recognize or reward the tangible  achievement  to  your inventor‐employees.

9. Part of Branding and Marketing Strategy

Not only employees, but also your product or even your whole business could use a  patent or a portfolio of patents to signal higher technological capabilities, greater innovative abilities and superior performance, in your advertising, marketing and branding strategies.

For further information, please follow the next contents, explore the world of intellectual property and chances that intellectual property may bring to your enterprise.