A patent gives its owner (or patentee) a right to exclude others from making, using, offering for sale, selling or importing the invention.
The fact that a patent does not necessarily give the patent owner a right to make or use his own invention often comes as a surprise to many. In the real world, inventions don’t usually exist by themselves, but are embodied in actual products. Multiple inventions are often embodied in a single product. For example, if a certain product or making thereof necessarily involves two inventions that are owned by two different patent owners, neither of the patent owners would have the right to make the product unless he receives a license from the other patent owner or designs a new product that does not use the other invention. In either case, each patent owner still has the right to exclude others from making or using his own invention.
That being the theory, the right of exclusion primarily serves as an instrument to benefit the patent owner, rather than a weapon to hurt others.
There are a number of benefits a patent can bring to its owner:
(1) A patent prevents others from stealing your invention. This is a fundamental aspect of property rights. Regardless of whether and how you will use your invention, it is good to have an ability to stop others, if necessary, from using your invention without your consent and to your disadvantage. With a patent right, you may still decide to give it away to others if you want to, but no one can force you to do so.
(2) The right of exclusion conferred by a patent often in practice, although not in principle as mentioned above, translates to an exclusive right to make or use. For example, in a case where a new invention results in an entirely new product, the owner of the patent to the new invention practically has an exclusive right to make and sell the new product. More commonly, if a new invention results in an improvement to an existing product, and if the owner of the patent to the new invention already had the rights to make the existing product, which often is the case, he would now have an exclusive right to make a new product with improvement.
(3) In complex technological areas where cross-licensing is commonplace, patent rights are the currency to “purchase” other company’s technologies.
(4) When sued by a competitor for patent infringement, having one’s own patents is an effective “defensive bargaining” chip.
(5) Patents are also effective deterrents to competitors. Even in cases where a patent does not give its owner the right to make or use, the right of exclusion puts its competitors in a disadvantageous position, which often in turn translates to an advantage to the patent owner.
(6) Patents are a tangible measure of the return on the company’s investment in research and development. This is a derived or secondary value of patents, but nevertheless an important one. For startup companies or individual inventors in particular, a patent portfolio can be the most effective way to demonstrate the strength and value of the company before a profitable product can be shown.
(7) Patents preserve the internally developed ideas and prevent them from leaving the company with the departure of certain employees. Often researchers or engineers develop new ideas that may not be closely related to their job duty. In such circumstances, the new ideas tend to be undisclosed unless the company encourages patent filings. When such employees leave the company, the undisclosed ideas will leave the company with them. In the worst cases, if the departed employee joins a competitor, the ideas may even be further developed and later become patent right by the competitor. Although there may be a question of genuine ownership of the patent in such conditions, undisclosed ideas are hard to trace.
(8) Even if the patent owner does not make a product, patent rights are valuable assets in their own rights because the patent owner may either sell the patent rights or license them to earn royalties. In fact, patented inventions have emerged as commercial products in their own, so much so that there are already creative companies whose core business is making and selling inventions.
The patent rights, particularly the right of exclusion can thus be extremely powerful and effective in the competitive commercial world, making patents the most important type of intellectual property.
In technology industries, especially high-tech industries, the value of the patents owned by a company can be a large portion of the company’s entire assets. For some companies, especially startup companies, an overwhelming majority of a company’s assets may be in patents the company owns.
