A patent (a form of intellectual property) is a set of exclusive rights granted by a sovereign state to an inventor or assignee for a limited period of time in exchange for detailed public disclosure of an invention. Patents provide incentives to the inventor or the assignee by offering them recognition and material reward for their inventions. The patents play an important role in company’s commercial outlook and financial health of a company. Therefore, protecting the marketable inventions is becoming a strategic necessity in business.

Expenditures on knowledge, through investments in R&D or software, have grown at a higher rate than expenditures in tangible assets. Change is investment is reflected by more importance of intangible assets and patents in the companies. So, to know the value of a company it is essential to know the value of intellectual property (IP). Many of the established companies have built strong portfolios of thousands of patents and some of them license out parts of their portfolios to other companies for millions of dollars. Wealth of these companies is encapsulated in their intangible assets such as patents.
Patents offer many benefits. The patents can attract investors and deter competitors as they are protected by law. They can be used to raise development finance and can also be used to generate new income streams through licensing. In case of licensing a product to other company, patent owners retain their ownership and the patents function as valuable assets during negotiations and helps in deriving an economic benefit, usually in the form of royalty income. Further, the patents give the companies a confidence of not infringing on other patents even if they license a patented technology or product. Licensing-out of patents could also help companies to commercialize their technology or expand their current operations into new markets more effectively and with greater ease than on their own. Also, licensing of the patents may also provide a means for turning an infringer or competitor into an ally or partner by avoiding or settling IP litigation, which may have an uncertain outcome or may be costly and/or time consuming. There are licensing-in opportunities also that, when paired with a company’s current technology portfolio can create new products, services and market opportunities. A valuable patent can help or can be used as a security for bank loans or to attract venture capitals.
The patents can also be used to create a business presence in different countries without incurring a large expenditure. Every patent has its own significance in particular area and can help in maximizing its market potential. Hence obtaining a patent could be smart business approach.