Skip to main content

Patent strategies for startups and SMEs

27 August

4 mins

In the US, patents are the basis for every startup. Many invest a large part of the initial capital in a patent portfolio even before a product is finished. For young companies, and SMEs in particular, the patent system in Europe also offers a wide range of opportunities to increase their own value, attract investors and customers, and boost sales.

The patent system is based on prohibiting third parties from using a patented invention. In addition to legal action for infringement, it allows a wide range of strategic options for action. Young/early-stage companies in particular will want to avoid cost-intensive legal proceedings, so it is therefore more important to know the strategic value of patents for the long-term success of the company.

What strategies are there?

Prohibition and risk strategy
With the help of the prohibition right, a patent has a deterrent effect on competitors even without a lawsuit being filed, especially if this protection is known or actively communicated to competitors and customers. Thus, the filing of a patent application has influence on the competitors, increases their risk and enables higher prices for your own product.

Marketing strategy
The slogan “patent pending” contains a quality statement that should not be underestimated. It refers in particular to the unique selling points of the product. In the B2C market, patents and patent applications create risks for supply chain relationships if a business customer does not buy from the patent holder. The patent portfolio thus supports sales and marketing in order to be able to add a further sales element in addition to the price and functionality of the product.

Investor strategy
For many investors, the existence of a patent portfolio is an obligation for an investment decision. The patent protection of the product secures the investment in the long term. It is often sufficient if relatively inexpensive national patent applications offer the option (for 12 months) of extending protection in additional countries.

Exit strategy
When a company is sold, the question of value and price usually arises. A potential buyer will take into account how easy it is to copy the business concept and thus endanger it. In addition to the knowledge of employees and existing customer relationships, intellectual property protection is possible almost exclusively through patents, especially in software-based companies.

Licensing strategy
Even patents without relation to a company’s own products can be useful. They allow for additional income by granting paid licences to third parties, which enables businesses to generate revenues even without their own products.

It is worth noting that the above  strategies can also be combined, depending on the IP being protected.

The impact of patent strategies

Patents have a great influence on the value of a company. A detailed elaboration of a patent strategy is therefore indispensable, especially for startups and scaleups. Ideally, it should be adapted to the development of the company at regular intervals. Patents are omnipresent in the business world. A decision against the use of patents can also be a strategy. However, it should be made consciously and purposefully and does not release you from the obligation to observe the patents of your competitors.

Contact a member of the Mathys & Squire team to discuss how we can help to increase the growth and value of your business through the creation of a bespoke IP strategy.

A version of this article was published in gateWAY Magazine in July 2020.

Written by: Andreas Wietzke