What is the Purpose of Patents in Startup?

A patent is a government-granted legal monopoly in exchange for public disclosure of an invention. A patent grants the owner the right to prevent others from exploiting the invention in the region covered by the patent.

A patent can be extremely valuable to the owner. A patent permits the owner to profit from his or her invention without fear of competition. They can either work on the patent themselves, such as by producing the patented goods, or they can license the invention to other people for a charge. The proprietor can sue anybody who utilizes the patented idea without first obtaining a license. If an infringer is successfully prosecuted, they can be stopped and ordered to pay damages and costs. 

As a result, a patent can either reserve the market for the patent owner or be utilized to create revenue for the owner. While these advantages are beneficial to organizations of any size, patents can provide a number of additional benefits that are especially beneficial to start-ups.

Investment Prospects Improved

For a variety of reasons, an important patent, or even a full patent portfolio, might help in attracting investors. Patents can establish that a start-up is of a specific quality in addition to functioning as an entrance barrier against possible rivals. This can assist mitigate the liabilities that come with being a new business, as well as boost the start-negotiating up’s position. It’s no wonder, however, that while roughly 40% of all start-ups are said to have patents, this number has been claimed to grow to around 80% among those who get venture capital funding.

Invention Protection

Patents can help prevent larger competitors from stealing a startup’s ideas. A patent can dissuade a larger company from taking a start-innovations up’s in the first place, in addition to offering a route of remedy against infringing rivals.

Defending Against Rival Companies

It is not unusual for bigger, established corporations in a given area to file a patent infringement claim against a start-up competitor. An incumbent corporation, in instance, might try to put a start-up competitor out of business by fast depleting its more restricted resources. A strong patent portfolio may assist a startup defend itself against such an attack by bolstering its intellectual property position, allowing it to better bargain with competitors and fight back.

Operational Freedom

Patents can also help a startup keep its operating freedom. If the company is a first-mover in an area, its patent(s) might operate as a barrier to entrance for future competitors. This can deter “copycat” competitors from joining the market and filing their own patent applications, leaving the field open for the startup.

Acquisition Prospects Improved

Patents, as previously said, are a significant asset for any company. As a result, patents may boost the chances of a startup being acquired. Furthermore, start-ups with significant and valuable intellectual property may be able to use their intellectual property to secure a lucrative acquisition agreement.

Finally, patents can support a startup in preparing for a public offering (IPO). A strong patent portfolio might relieve investor concerns about a company’s legal risk ahead of an IPO. Furthermore, a start up’s patent portfolio may help defend the company against alleged infringement attempts by rivals, which may be timed to disrupt the IPO, as well as protect the company from future lawsuits.