IP Guide for SMEs:

Patents

Turning Your Inventions into Profit-making Assets

By World Intellectual Property Organisation (WIPO)

Reasons for Patenting Your Inventions

What Happens if you do not Patent Your Inventions?

 

Innovative and creative ideas are at the heart of most successful businesses. Ideas by themselves, however, have little value. They need to be developed, turned into innovative products or services and commercialized successfully so as to enable your SME to reap the benefits of your innovation and creativity. Intellectual Property (IP), patents in particular, can be crucial for turning innovative ideas and inventions into competitive products that significantly increase profit margins.

Your SME may also use patents to earn royalty revenue by licensing such patented inventions to other firms that have the capacity to commercialize them. This may not only save your SME money, but also provide you with a stream of income from your invention or the inventions of employees of your SME, without the need to invest in its commercialization.

For practical information on the costs of patenting, the time taken for patents to be granted and other useful FAQs, see link or contact your National IP office.

Reasons for Patenting Your Inventions

  • Exclusive rightsPatents provide the exclusive rights which usually allow your SME to use and exploit the invention for twenty years from the date of filing of the patent application.

  • Strong market position Through these exclusive rights, you are able to prevent others from commercially using your patented invention, thereby reducing competition and establishing yourself in the market as the pre-eminent player.

  • Higher returns on investments Having invested a considerable amount of money and time in developing innovative products, your SME could, under the umbrella of these exclusive rights, commercialize the invention enabling your SME to obtain higher returns on investments.

  • Opportunity to license or sell the invention If you chose not to exploit the patent yourself, you may sell it or license the rights to commercialize it to another enterprise which will be a source of income for your SME.

  • Increase in negotiating power If your SME is in the process of acquiring the rights to use the patents of another enterprise, through a licensing contract, your patent portfolio will enhance your bargaining power. That is to say, your patents may prove to be of considerable interest to the enterprise with whom you are negotiating and you could enter into a cross licensing arrangement where, simply put, the patent rights could be exchanged between your enterprise and the other.

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  • Positive image for your enterprise Business partners, investors and shareholders may perceive patent portfolios as a demonstration of the high level of expertise, specialization and technological capacity within your company. This may prove useful for raising funds, finding business partners and raising your company’s market value.

  • In many cases, where an enterprise has merely improved an existing product and the said improvement is not sufficiently inventive to be deemed patentable, utility models (or "petty patents" or "utility innovations") may represent a good alternative, if available in the country in question. On occasions, it may be advisable for your SME to keep its innovations as trade secrets which requires, in particular, that sufficient measures are taken to keep the information confidential.

    It is highly advisable for SMEs engaging in inventive activities to consult patent databases to find out about existing technologies, identify licensing partners in case a technology already exists and avoid duplication of research activities. A more comprehensive analysis of the importance of patent searches is available.

    What Happens if you do not Patent Your Inventions?

  • Somebody else might patent them In most countries (with the exception of the United States), the first person or enterprise to apply for a patent for an invention will have the right to the patent. This may in fact mean that, if you do not patent your inventions or inventions of the employees of your SME, somebody else who may have developed the same or an equivalent invention later may do so and legitimately exclude your enterprise from the market, limit its activities to the continuation of prior use, where the patent legislation provides for such exception, or ask your SME to pay a licensing fee for using the invention.

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  • Competitors will take advantage of your invention If the product is successful, many other competitor firms will be tempted to make the same product by using your invention but without having to pay for such use. Larger enterprises may take advantage of scale economies to produce the product more cheaply and compete at a more favorable market price. This may considerably reduce your company’s market share for that product. Even small competing enterprises can produce the same product and often sell it at a lower price as they do not have to recoup research and development costs incurred by your SME.

  • Possibilities to license, sell or transfer technology will be severely hindered Without IP rights, transfers of technology would be difficult if not impossible. Transfer of technology presupposes ownership of a technology which can only be effectively obtained through appropriate IP protection. Moreover, wherever negotiations do take place for transferring a given technological development without IP protection over the technology in question, parties are suspicious of disclosing their inventions, fearing that the other side may “run away with the invention.” IP protection, in particular patent protection, is crucial for acquiring technology through its licensing.

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