The success of many companies is not always just about what they invent; it’s also about what they acquire. Patent acquisition can be a game-changer. Essentially, this means one company buying the legal rights to an invention from another, giving them exclusive control.
Why go this route? It’s a powerful move that can reshape a company’s market position. How can companies navigate the world of patent acquisitions? With a strategic and meticulous approach.
How patent acquisition shapes a company’s market position
Companies use patent acquisitions to strengthen their IP, block and tackle in competitive markets, and generate new revenue streams.
Blocking competitors
Companies often acquire patents to prevent rivals from entering their market space. By building a robust patent portfolio, they create barriers to entry, safeguarding their market share. For example, companies in technology-heavy sectors, like telecommunications and semiconductors, build large patent portfolios. These portfolios create “patent thickets,” making it difficult for competitors to operate without infringing. Even if a competitor can design around one patent, a large portfolio of related patents can effectively shut them out of a market.
Gaining technological superiority
Acquiring patents can provide access to cutting-edge technologies that a company might not have developed internally–accelerating innovation and providing a technological edge. For instance, companies involved in development of AI technologies are constantly acquiring patents related to machine learning, and other related technologies, to ensure they remain at the cutting edge of that technology. For example, while not a direct “purchase” of individual patents, Microsoft’s substantial investment in and close integration with OpenAI effectively grants them access to and influence over OpenAI’s extensive AI patent portfolio.
Securing future technologies
Companies also acquire patents to secure access to technologies that may be crucial to their future growth. This is particularly important in rapidly evolving industries. Companies involved in the electric vehicle automotive industry are seeking out patents related to battery technology and charging infrastructure, for example, to secure their future market position. (At the same time, these automobile manufacturers let some of their older patents lapse, particularly those related to engines and emissions.)
Generating revenue and licensing opportunities
Of course, patents aren’t just about defense or innovation. They can also be a significant source of revenue through licensing. This is particularly common in industries with high R&D costs. Companies that hold fundamental patents in areas like telecommunications often generate substantial revenue through licensing agreements with other manufacturers. A classic and ongoing example of a large company licensing patents to generate revenue is Qualcomm’s licensing of its cellular technology patents.
Increasing company valuation
A strong patent portfolio can significantly increase a company’s valuation, making it more attractive to investors or potential acquirers. For example, Alcatel-Lucent’s significant IP portfolio, comprising 5,000+ U.S. patents, was a major factor the company’s acquisition by Nokia. Similarly, when Microsoft acquired Activision Blizzard in 2023 for $69 billion, it gained access to a vast portfolio of gaming-related patents, which had contributed to the overall valuation of the acquired company.
Navigating the complexities of patent acquisition
Navigating the complexities of patent acquisition demands a meticulous and strategic approach, as the value of acquired patents directly impacts a company’s competitive edge and long-term business goals. Whether acquiring a single patent or an extensive portfolio, the heart of the process includes identifying and evaluating suitable patents, conducting thorough due diligence to assess their validity and value, and navigating the intricacies of legal transfer and registration with bodies like the USPTO.
Crucial to this process is comprehensive patent search and analytics, which provides the necessary information to make informed decisions during a patent acquisition. A thorough prior art search is vital in determining the true validity of patents by uncovering potentially invalidating prior disclosures or those that are narrow in scope. It also provides insights into the competitive landscape, revealing the patents held by competitors and their technological strengths that can be valuable during negotiations.
Second, thorough analysis of a company’s existing patent holdings can identify gaps in coverage, areas of technological strength, and potential overlaps or redundancies. By understanding the current landscape of their patents, organizations can pinpoint specific technologies or market areas where acquisitions would be most beneficial. This allows for targeted searches and evaluations, ensuring that acquired patents align with the company’s overall business objectives and fill critical strategic needs.
Finally, by leveraging tools like patent landscape analyses, companies can get a holistic view of a technology area to understand whether (and how) to capture innovation opportunities through patent acquisitions.
Patent acquisitions are a crucial tool for innovation
The patent acquisition process, while complex, is a powerful strategic tool for companies seeking to bolster their competitive advantage and secure their innovative future. By meticulously navigating the stages of identification, evaluation, and legal transfer, informed by thorough patent searches, portfolio optimization, and strategic valuation, businesses can ensure that acquired patents align seamlessly with their long-term goals.
To see how UnitedLex can you identify and maximize new IP opportunities, let’s talk.
