Benefits from a patent grant

You gain a monopoly basically

A patent confers a monopoly on you to make, use and sell your products which incorporate the invention. A patent protects your inventive ideas (as compared to copyright, which only protects the expressed form of the ideas). Hence, once you get a patent, you could prevent your commercial rivals from directly competing with you, enabling you to earn a higher profits margin from your products.

You can earn licence fees

If you make an invention, you should consider patenting it even though you do not see immediate market for your invention. Because other people may see a use in your invention and be willing to pay licence fee to you. In the late 70s, Xerox invented the Graphical User Interface but failed to patent it. The GUI was subsequently used by Microsoft and Macintosh as the basis for their PC operating systems. On a conservative estimate, Xerox had gifted away more than a billion US Dollars by way of free licence.

Patent is a defensive shield

A patent is also an important defensive shield. Most countries, with the exception the U.S., adopt a first to file priority system. (The U.S. adopts a first to invent priority system. However, as regards foreign applications, the USPTO treats the filing date as invention date.) If you fail to patent your invention in the first opportunity, your competitors may do so, then your entire R&D effort will be erased: Once your competitor gets the patent, you will not be allowed to make use of the fruits of your own invention.

Essential tool to penetrate foreign markets

Holding a patent is the prima facie evidence that you are the owner of the intellectual property rights in your products. Many foreign buyers, especially in the U.S., require local manufacturers/sellers to prove their ownership of intellectual property rights in their products so as to protect themselves from infringement suit (in case your products infringe third party rights). Hence, you would have to show to your foreign buyers that you hold or have applied for a patent for your products before they are willing to buy from you.

David’s sling against Goliath

Patents are as important to big corporations as to small and emerging companies. In a fiercely competitive market, very often a dominant product or brand will snatch up a very big market share by overwhelming advertising and promotion, making it very difficult for smaller competitors to survive. However, a small competitor has a chance to deal a blow on Goliath if it excels the dominant product by invention and protects that invention by patents. This point is neatly illustrated by the case of Polariod v Kodak mentioned above. If Polariod has not patented its inventions, Kodak would surely have drown it by its superior corporate strength.

Enhance the value of your company

If a third party is interested in investing in your company by acquiring shares in it, the share price would be greatly enhanced if your company holds some valuable patents. In 1997, Microsoft paid $425 million to acquire WebTV Networks, an Internet TV company with fewer than 60,000 subscribers. The price was 40 times the industry average on a per subscriber basis. Microsoft was willing to do so because WebTV holds 35 important patents covering the delivery of Internet content over TV.