In order to encourage strategic inventing in an organization, there is a general need for researchers and managers to have a good understanding of the patent system – what can be protected, and the differences in the quality of protection. Attorneys can be very helpful, but they are often too overwhelmed with demands on their time to focus on the development of a concept at the initial idea stage. As such, the people that are doing concept development and selection need to be aware of potential IP benefits.

Importantly, decision makers must realize that all patents are not created equal. In many industries, the prior art is so crowded that protection is generally granted only for relatively narrow, incremental improvements. Next time you’re in the supermarket, pick up a branded product and flip it over to check for patent numbers. Chances are, you’ll find at least one. Now consider the products to the left and right on the shelf - are they substantially similar? If so, there’s a good chance that the patent protection is modest at best. True, many improvements are not readily apparent at first glance. However, if the consumer can’t tell the difference, the associated patents are probably not as valuable as one might hope.

Furthermore, different types of claims lead to different degrees of protection. For example, broad compositional and structure claims are generally better protection than process and method claims. Product claims are generally stronger than product-by-process claims. While many researchers are familiar with the basics of the patent system, many are unfamiliar with the less common details such as protection against induced or contributory infringement and how protection for business methods might be established. In general, the more researchers know about available protection, the more likely they will be to develop new products that maximize the value of the granted patents.

Finally, maintaining organizational support for creative ideas is often a difficult task. Developing concepts that have strong IP positions, but minor functional improvements may run into even larger hurdles. Frequently, project support is garnered through concrete technical data and “wowing” the decision makers with a demonstration of product benefits. Leaders need to be aware that a less impressive, less functional products with a stronger IP position may be more profitable in the long run. It may be counterintuitive, if not downright painful to promote a project with a strong IP position but few functional benefits. As such, a rigorous system for evaluating the value of patent protection for each project should be in place. The more rigorous the comparison of value of the IP positions for each project, the higher the likelihood of strategically significant products making it to the marketplace.

On the subject of valuation of a patent position, how does one know if patent protection is worthwhile? Specific valuation of patents is a very complex topic since costs and benefits are heavily dependent on the technology and industry involved. However, there are a few broad points that can be made with respect to value.

First, patent protection in the United States is relatively inexpensive. Depending on the field, outside attorney fees are generally around $10,000-20,000 per application. If your primary market is the US, this is a relatively inexpensive hurdle. Foreign protection can be much more expensive, of course, but there are several strategies that can be used to delay these costs until the success of the product has been evaluated.

Second, while benefits of patent protection can be difficult to quantify on an individual basis, it is relatively easy to see its potential in the performance of broad industries. For example, basic economics suggests that without a competitive advantage any specific product will eventually suffer price and profit declines until the market is driven to minimum profit levels. Such effects can be seen in markets with heavy overseas competition – if price is the only means of differentiation, profit will eventually dissipate until the lowest cost manufacturer wins.

Conversely, industries with substantial competitive advantage in the form of patent protection have a well-documented history of profitability. The most obvious example is the pharmaceutical industry because of its overwhelming reliance on patent protection as the primary means of competitive advantage. However, technology companies frequently have well established competitive advantage as a basis for increased profits – so much so that many Wall Street firms use patent assessments in the overall valuation of a company. Some estimates suggest many of these companies derive 2/3rds of their value from intellectual property alone.

More patents do not necessarily equal more value. The key is, of course, that the patent protection developed by any strategy must create a meaningful competitive advantage. While the preceding anecdotal examples likely don’t specifically address your industry, they do lead to this general rule: If meaningful patent protection is available for a product improvement, it will likely be well worth the investment in financial returns.