August 6, 2009

How patents can benefit small businesses (yes, yours too!)

Before I started working with Corporate America, I thought patents were exclusively reserved for mad scientists and geniuses, those who spend hours in a laboratory mixing chemicals, and blow up the lab and burn half their hair in the process. A patent workshop at Xerox, my first real employer out of college, was my first exposure to patents and patent protection. Xerox had good reasons to encourage its employee base to focus on patents. The company had grown fat off of its xerography patents for decades, and the year the main patents ran out, the Japanese had very competitive products sitting on the shelves all over US.

Point #1: Patents can protect your business from competition. That translates to revenues and profits for you, and more work for your competition.

Years after that workshop, I landed a marketing job at a small company with a handful of patents. There, I saw (and fully unleashed) the PR power of patents. Every sales presentation, press release, data sheet, and outbound communication was peppered with mentions of our patents and patent-pending technologies that we licensed to large corporate clients. Not only the patents firmed up a tight niche for our technologies by fending off competition, they also helped us present our smallish group as the innovative elites in the field: you really want our technologies, because we were the geniuses who came up with them first!

Point #2: Patents can be optimally used in marketing and PR because of the elite factor associated with them. Use this to your advantage!

Through various consulting and business ventures, I got more and more entrenched with companies developing intellectual properties (which eventually became a niche for my own services) – companies ranging from the third largest patent holder in the world at the time, to mad scientist outfits mixing chemicals day in and day out. I ended up with a few patents of my own. And here’s the kick – it all happened by accident. I wasn’t thinking about developing patents. I was developing a program that I thought was unique and clever, and the next thing I knew I was sitting across the table from patent attorneys filling out the documents.

Point #3: Patents are often the result of unplanned activities that are easily overlooked. Pay attention any time a new idea is put on the table and ask yourselves: can we patent this?

One of the small companies I worked with developed light conducting chemicals and LED patents. The founder of the company had many patents under his belt and continued to produce more. Despite the best efforts of those around him, the company eventually folded without a viable product or client base due to poor business execution.

Point #3: Patents protect your business but don’t build it. You still need to execute.

I’ve made a habit of asking potential clients about their patent portfolio – within the first 10 minutes. It makes a huge difference to me whether or not the client is cognizant of the power of their own innovation or what they can do with it. Not too long ago, I sat across the table from the CEO of a small software company who lamented lowered sales “because of the bad economy”. Or so he thought. Turns out they had developed very unique web technologies without patenting them. They had a good run until a couple of overseas outfits developed identical technologies and attacked their customer base with no licensing fees and very low royalties. Last I checked, a few of the top executives were connecting to recruiters on LinkedIn. OOPS!

Point #4: Read point #1 – over and over again.

Point #5: If you think securing patents is an expensive proposition, read point #4 – over and over again.

During the recent downturn, even as hordes of small companies are shutting down, those with patent portfolios have edged out those without. Although venture capital funding is down by 63% so far this year, the market for buying intellectual properties and patent portfolios is as hot as ever. Those money people don’t cease to realize the power of innovation and are actively purchasing intellectual properties and patent portfolios of distressed companies. So even in death, companies can realize the benefits of their patents.

I hate to end this blog post talking about the death of companies. So get to work, execute, and … read point #1 – over and over again.


  1. Hi Kat,

    I enjoyed your blog. Naturally, I agree with you.

    I now work as a State Park Docent and as a Director of the San Luis Obispo Art Center. With jobs like these where one pays to work, I certainly appreciate patents of the past.

  2. Hello Barb, thanks for reading and commenting on the blog. You and the gang at your company taught me perfect cases for how patents can grow and sustain a small business, and I certainly learned much from you. Glad you are enjoying your retirement. Best. Kat

  3. Good point Kats. Another point to keep in mind is the fact that often the value of the patent application is not fully realized until several years after the product hits the market. By then the technology has ramped up and having a patent allows market exclusivity.

    Attorney D. Salehi

  4. Hi Kat,

    Interesting Blog. I come from a slightly different approach. Tech Bridge West works with the large firms you mentioned that have plenty of unused IP sitting in patents, trade secrets and in the minds of aspiring entrepreneurs. We help them unlock the value of the unused IP by reaching out to small companies and individual entrepreneurs. These outside forces are invited to use that IP to create products and businesses the 'parent company' can then share in the revenue generated. This 'co-creation' of value is a process coined by Dr. Henry Chesbrough called Open Innovation.

    I would love to hear your thoughts on Open Innovation and how it could help the companies you speak of generate value from all that tied-up IP.

    Great topic and I look forward to any follow-up from the group.


    Kurt C Schneider
    President and Lead Product Accelerator
    Tech Bridge West

  5. Kurt, thanks for posting, and yes, that is a great win-win situation. It's similar to investing in startups, except instead of money, they give them their IP and share the proceeds. Brilliant, actually.

  6. Kat, Nice Job! I must say as a patent practitioner, I heartily agree about the potential value of patents. However, we work with many clients at our firm, Matlock Law Group, on other IP strategies such as trademarks, copyrights, and trade secrets. In many cases, these programs can be equally effective.