Put Yourself in Someone Else’s Shoes: Using Patents to Improve Attractiveness and Value for Acquisition

Many C-level executives in startups and small medium enterprises (SMEs) often say: "Why bother with patents? They cost so much to get and they're so expensive to enforce. I've got no hope of enforcing my portfolio if a large company with deep pockets infringe."

In business it's often a good idea to put yourself in another party's shoes, for example, your customer or supplier. So, when I hear C-level executives say the above about patents, my advice is to put themselves in another party's shoes: That of a potential acquirer.

Their objections are partially correct. Patent filings can be expensive. While there are ways to potentially reduce costs, it can be expensive to enforce patents. However, for a potential acquirer, a good patent portfolio increases their company's attractiveness and value as an acquisition target or as a partner. Also, the value of the portfolio is likely to be many multiples of the cost to obtain and manage the portfolio.

An example of this occurred in December 2019, when Adaptiv Networks acquired LiveQoS. Adaptiv Networks CEO Bernard Breton stated that:

"The expertise we are getting from the LiveQoS engineers, along with the patents and technology places us as a technological leader in the SD-WAN space with 20 relevant SD-WAN patents”

Adaptiv also stated the following in a press release:

"The addition of a highly skilled and experienced team will enable Adaptiv Networks to improve its offering, accelerate its plans to better serve its valued customers, and pursue its plans for growth. In addition, the combined patent portfolio will form one of the most comprehensive in the SD-WAN space."

Here's another example: In May 2017, Cisco acquired AI startup Mindmeld. Cisco stated that part of the reason was the MindMeld patent portfolio: 

"With ten patent assets* to its name, MindMeld brings industry-coveted AI, software and engineering talent and expertise to further the evolution of Cisco's collaboration suite."

I also suggest that C-level executives put themselves in the shoes of a potential investor. Increased attractiveness and value as an acquisition target would likely make their startup/SME more attractive to investors. Doesn't that make fundraising easier?

But what about large companies infringing? Well, what if another large company with deep pockets finds the startup/SME’s technology and patent portfolio attractive? The other large company has the resources to enforce the patent portfolio. Additionally, knowing that one large company uses the patented technology will likely increase the attractiveness and value of the portfolio to the other large company. This is especially true in a patent-litigious field such as mobile technologies. Doesn't that make the startup or SME a target for acquisition by the other large company? 

So, if you're not sure whether or not to file for patent, the best course of action may be to put yourself in another person's shoes, in particular that of an acquirer or an investor. Putting yourself in another party’s shoes is great business practice, and practicing it with regard to patents could benefit you greatly!