Are You Making a Bad Investment?

Do you know what you are going to do with your patent?

 

Yesterday morning I sent the following tweet.

“All I hear is how expensive IP is.  Maybe you don’t understand its value; its purpose.  If you knew how to use it, you might spend more.”

This sparked a short twitter conversation with @ManagingIP about what aspect of IP is seen as expensive: protection, enforcement, or defense,  and whether IP spend is seen as a tax or an investment.

I think most companies see IP spend as a tax, and that the grumbles about IP being expensive are around protection, especially patent protection.  Maybe it’s because I’m listening to a lot of start-ups lately, and they’re short on money.

Or, maybe it’s because I’ve been doing this long enough to know that, even though IP enforcement and defense are expensive, the average company doesn’t really think about that aspect of IP protection.  The main event is protecting the invention or the brand, with little thought given to what they’re actually going to do with it once they get the patent.  (If I had a dollar for every time I heard, “You mean I have to enforce my patent?”)

The way I see it, many organizations in general view IP as a necessary evil.

Based on my 12+ years as an intellectual property attorney, I am under the firm belief that most companies protect their intellectual property out of habit.  They really don’t know why they want that patent.  They just do it.  And if these same companies just knew why they were protecting their IP and plan for its future use, they’d see a greater return-on-investment sparking more, and dare I say better, investment.  (Hence yesterday’s tweet.)

All of this got me wondering…

Why is the ‘getting’ so important?  I can’t think of any other business asset that people stockpile like patents.  Of course, I do understand that to use patents, organizations typically have to wait for a future event to happen, like an infringer comes along, counterfeit goods are being sold into your market, or someone wants to license your technology.  So, the stockpiling does make sense because you have to get it early for use later.

But what if you know that you will NEVER sue anybody for patent infringement?   Why do those companies still spend lots of money protecting their IP?

Is the amount of money companies spend on intellectual property worth it?

At what point is intellectual property protection a good (or bad) investment?  (And how do you know?)

If intellectual property is a business asset, that asset should bring the company value.  How do you measure the value IP brings to any given company?

Is it the amount of money the asset brings to the bottom-line?  If so, we’re most-likely talking about companies that engage in expensive licensing and litigation practices.  I would argue (based on the low number of patents that ever go to litigation) that’s not the average IP owner.

Or is the value in the portfolio size?  That strategy works for Japanese companies.

There is also value that is intangible, just like the asset itself.

There are a lot of factors that enter into answering these questions, like industry, type of technology involved, size of company, country of origin, risk tolerance, and 100 other factors I haven’t even thought about.

I have to admit that I’m not really sure how to answer these questions right now.

If you have thoughts, dear Readers, on what makes IP a good or bad investment, please let me know in the comments.