Patents are a form of intellectual property that gives the patent owner the exclusive right to exclude others from making, using, selling and importing the invention covered by the patent for a specified period of time, typically 20 years from the date of filing. However, simply owning a patent does not automatically generate revenue or financial value.

When it comes to creating value from your patents, things get complicated. This is because the success rate of a patent or group of patents depends on a variety of factors, including legal, technological, and business perspectives.

Basically, I can say that “patents have no (real) financial value unless you take action!

This statement underscores the need for patent owners to actively leverage their patents to realize financial gain. This can be achieved through various actions, such as Licensing, selling the patent, manufacturing and selling the patented technology/product, enforcement, or strategic partnerships.

But the most important component of patent valuation is revenue generation. So, if you want to have a valuable patent that can generate revenue in the market, this patented technology must have at least these 10 power factors to become valuable.

Why are we talking about these 10 key success factors?

The EPO published a series of technology transfer case studies in 2021, one of the selected successful cases was “Dermalix“, where I was in the team during the patent commercialization journey that took more than 7 years! So this patent also has most of the 10 performance factors I have listed below. We have demonstrated the importance of these factors in a real-world case that illustrates the significant value of patents in commercialization: by securing robust patent protection for their wound dressing technology, the team not only secured their innovation, but also attracted venture capital that enabled clinical trials and product development. Strategic IP management facilitated a partnership with a major pharmaceutical company, underscoring the importance of patents in enhancing the marketability and success of technological innovations in the competitive pharmaceutical landscape. Ultimately, we were able to sell the patent to this large pharmaceutical company, and the product protected by this patent is on the market and being used by patients to heal their open chronic wounds.

So let’s dive into these power factors.

1 . Solves a Real Problem 🔧

The cornerstone of a valuable patent is its ability to address and solve a real-world problem. This attribute is fundamental because it is directly related to the relevance and applicability of the patent in the marketplace. A patent that provides a novel solution to an existing problem not only stands out among thousands of patents, but also opens the door to significant interest from industries and investors who are constantly looking for innovative solutions to enhance their offerings or solve pain points.

The patent’s ability to meet a specific need or overcome a challenge not addressed or inadequately addressed by existing solutions is the essence of solving a real problem. That’s the quality that transforms a patent from a mere document into a valuable commodity.

In addition, licensing opportunities, strategic partnerships, and even direct sales are more likely to result from a patent that solves a real problem. These opportunities further translate into revenue streams that validate the value of the patent beyond its legal claims. A patent’s potential to solve a real problem also increases its appeal to venture capitalists and investors who are eager to back innovations with a clear path to market and customer adoption.

2 . Invention-Market Fit 💡

It must deliver value to customers by solving their real problems. Solving a real problem is not enough, your patented technology needs to be used by customers, or we need to see traction to understand if the patented technology has potential to become a next solution to be used in the market. It is also important to see if customers are buying the product because of the patented feature or not. This will show the value of the patent. The patented technology has to be the real reason someone is buying the product.

Patenting a feature that no one is going to use is worthless. If you want to secure that value, you have to invent with a “needs first” approach rather than an “ideas first” approach.

3 . Market Potential 📈

The “market potential” of a patent is a critical determinant of its value and attractiveness to investors, companies and entrepreneurs. This factor assesses the scope for commercial success and revenue generation based on the size and growth prospects of the market targeted by the patented invention. A patent with significant market potential is one that addresses a need or demand in a large or rapidly growing market and offers solutions that can be widely adopted across industries or consumer segments.

The market potential of a patent is evaluated by considering several key aspects: Target Market Size, Market Growth Rate, Competitive Advantage, Adaptability and Scalability.

Assessing market potential requires not only understanding the current market landscape, but also anticipating future trends and shifts in consumer behavior. A patent that is prepared to meet not only the needs of today, but also the needs of tomorrow, demonstrates a foresight that can significantly increase its value. In summary, a patent’s market potential reflects its ability to generate revenue and achieve commercial success in a particular market.

It is an essential component of a patent’s overall value, underscoring the importance of strategic planning and market analysis in the patenting process. A patent with high market potential not only attracts investment, but also serves as a catalyst for innovation and growth in its field.

4 . Enforceable Claims 🌍

A patent’s enforceable claims are the backbone of its protection and a cornerstone of its valuation. These claims define the scope of the invention’s protection and are essentially the legal boundaries within which the patent owner has the exclusive right to operate. Enforceable claims are critical because they determine the ability of the patent to withstand legal challenge. This section emphasizes the importance of drafting claims that are not only broad enough to cover the essential features of the invention, but also precise enough to be defensible in court.

Enforceable claims are the mechanism by which a patent protects its invention, and their strength directly affects the value of the patent. A patent with well-defined, enforceable claims can discourage potential infringers, provide a solid foundation for licensing negotiations, and ultimately contribute to the commercial success of the patent. In the competitive intellectual property landscape, the ability to enforce patent claims not only protects innovation, but also positions the patent holder advantageously in the marketplace. This strategic asset underscores the importance of enforceable claims in the anatomy of a valuable patent, ensuring that the invention remains a protected and profitable entity throughout its patent life.

5 . Freedom to Operate 🛂

Freedom to Operate (FTO) is a key aspect in the anatomy of a valuable patent. It represents the patent holder’s ability to commercialize the invention without infringing on the rights of others. An FTO analysis involves a thorough search and review of granted patents and patent applications to identify any potential legal barriers to the use, manufacture, or sale of the new invention.

The process of securing an FTO is complex and requires careful examination of the relevant intellectual property landscape. It often requires legal expertise to interpret the scope and claims of identified patents and to assess their potential impact on the commercialization of the new invention. In some cases, obtaining FTO may require negotiating licenses to use patented technologies or adjusting the design of the invention to avoid infringement.

A comprehensive FTO analysis not only strengthens the position of the patent, but also increases the confidence of inventors, investors, and partners in the viability and success of the patented technology.

6 . Strategic Licensing Potential 🤝

The strategic licensing potential of a patent is a critical factor that significantly enhances its value by providing a path to revenue without the need for the patent holder to directly manufacture or sell the product. Licensing involves granting permission to another party to use the patented technology under agreed terms, typically in exchange for royalties or a one-time fee. This potential is not only about the ability to license, but also about identifying and executing strategic partnerships that can unlock the full commercial potential of the patent.

Strategic licensing potential is not only about the inherent qualities of the patent, but also about the ability of the patent owner to identify and engage with potential licensees. It requires a proactive approach that includes market research, networking and negotiation to find the right partners who can effectively bring the patented technology to market.

In addition, successful licensing strategies often involve building a comprehensive patent portfolio (see Bundle-type Patent Portfolio 📚) that includes not only the core technology patents, but also related patents covering various applications and improvements. This approach can create a more compelling value proposition for potential licensees, offering them a broader range of solutions and greater flexibility in product development.

7 . Protection Power 🛡️

The Protection Power of a patent enhances its commercial appeal by providing a competitive edge in global markets. It reassures potential investors, partners, and licensees that the invention is well-protected and that the patent holder has exclusive rights in key territories. This level of protection is particularly important in industries where innovation is rapid and the risk of infringement is high. By securing robust patent protection in strategic markets, companies can confidently invest in marketing, production, and further research and development, knowing that their innovations are shielded from unauthorized use.

Understanding and selecting the right patent prosecution strategy is critical for patent owners seeking to maximize their protection in key markets. Each strategy offers different benefits and addresses specific needs based on the invention’s commercialization plan, target markets, and available resources.

Let’s take a closer look at the primary filing strategies:

  • Patent Cooperation Treaty (PCT) Filing
  • National filing first, then PCT
  • National filing first, followed by European patent (EP) filing
  • European Patent (EP) filing followed by validation in member states
  • European Patent (EP) filing and selection of unitary patent

and there are even more filing routes that can be used to secure a granted patent in different countries. Each of these strategies has its nuances, and the choice among them depends on several factors, including

  • Market priorities: Where the core markets for the invention are.
  • Budget constraints: The cost of filing and maintaining international patents can be significant.
  • Timing and flexibility: The need for early protection versus the desire for flexibility in selecting specific countries for patent protection.
  • Commercial strategy: Whether the invention is likely to be licensed, sold, or manufactured directly by the patent owner.

Understanding these strategies and their implications is essential for patent owners to develop an IP strategy that aligns with their business objectives and maximizes the global protection of their inventions. Careful planning and strategic decisions regarding patent filings can significantly enhance the protective power of a patent portfolio and provide a strong foundation for commercial success in the global marketplace.

8 . Ease of Infringement Detection 🔍

It refers to the patent owner’s ability to monitor and identify unauthorized use of its patented technology or invention. A patent that is easy to enforce because infringement is easy to detect can deter potential infringers and ensure that the exclusive rights of the patent are effectively protected.

This is particularly important in industries where copying or reverse engineering is common, making it critical for patent owners to be able to quickly identify and address infringement.

Ease of infringement detection plays a strategic role in identifying potential customers for patent licensing, thereby creating revenue opportunities. It allows patent owners to identify companies that could benefit from access to their patented technology through licensing agreements. This approach can turn potential infringers into valuable partners, creating new revenue streams for the patent owner.

Conversely, this capability also allows patent holders to effectively exclude certain companies from the market by denying them the right to use the patented technology. This exclusion can be a powerful tool for maintaining a competitive advantage and ensuring market dominance for the patentee’s products or services.

9 . Stage of Development 🌱

This factor refers to how far an invention has progressed from a mere concept to a marketable product or technology. A patent’s stage of development can range from initial concept and prototype development to advanced stages involving regulatory approvals and market testing. Understanding where a patent falls on this spectrum is critical for investors, partners, and potential licensees because it provides insight into the maturity of the technology, the amount of investment required to bring it to market, and the timeframe for potential return on investment.

10 . Bundle-type Patent Portfolio 📚

A bundle-type patent portfolio is a collection of related patents that can be used together to provide comprehensive protection for a particular technology or solution. In this approach, different solutions to the same problem are grouped together to provide complete patent protection to overcome the limitations of a single patented technology.

The bundle-type patent portfolio is an essential consideration in the context of patent valuation and commercialization, as it provides a comprehensive and strategic approach to protecting and leveraging innovations in the market.

In conclusion, we have explored the anatomy of a valuable patent, delving into the key factors that determine its value and potential for success. 10 power factors from the fundamental need to solve a real problem to the strategic nuances of global protection are essential to think about in order to get the maximum benefit from your patent(s). Each factor plays a critical role in transforming a patent from mere legal protection into a powerful engine for innovation and revenue generation. We also use these valuation factors in Patentiv, our new patent valuation platform designed for patent owners to determine the patent power, royalty rate and net present value of their patents.

Remember, a valuable patent is not just a document; it’s a strategic asset waiting to be unleashed. By understanding and actively leveraging these power factors, you can unlock the true potential of your invention and navigate the path from idea to market impact.

About the blopost author:

Mustafa Cakir is an industrial engineer with 14-year experience in patent portfolio management, patent data analytics, patent valuation and licensing strategies. He is the co-founder of Patent Effect since 2019, the company providing intellectual property, tech transfer, and startup services. He mainly leads patent data analytics services, patent research, patent valuation, patent portfolio management, patent commercialization, startup acceleration programs, technology transfer and commercialization services for patents and IP-based spinoff companies. He is also the co-founder of Patentiv supported by Berlin Senate in Germany. Patentiv is a digital platform designed for patent owners offering a 10x cheaper and faster patent valuation solution through a globally proven and reliable methodology.

He is acting as the President of LES Turkey which is a national chapter of Licensing Executives Society International. He is also recognized by IAM as one of the World’s leading 300 IP strategists in the World in 2022 and 2023.