What are patents and why are they important?
"A patent is the granting of a property right by a sovereign authority to an inventor. This grant provides the inventor exclusive rights to the patented process, design, or invention for a designated period in exchange for a comprehensive disclosure of the invention. They are a form of incorporeal right. Government agencies typically handle and approve applications for patents. " -Investopedia
Patents...
- are independent of company tangibles,
- can be bought, sold, used as collateral,
- can be used as a source of revenue & defense,
- are of real and growing interest to investors.
Why are patents an investment for companies?
- Competitors must buy license(s) to design products based on your patents.
- If not willing to buy, competitors must “design around” patent.
- Other competitors who do not buy licenses or design around may risk an infringement suit, an expensive & lengthy process.
What is a patent citation?
- Reference to prior technology, upon which current patent is built or uses
- Some added by inventors, others by examiners
- Some added to avoid infringement
Why is it worth doing a patent citation analysis?
- Patents cited by many later patents tend to contain important ideas upon which later inventors are building.
- A company with a large number of cited patents is likely to possess technology that is central to developments in its industry.
- Many studies have revealed a link between citations & technical importance of patents
- Other studies show a connection between patent citations & stock valuations.
