Every sector is driven by inventions and innovations. All top organizations have a specialized research and development team working perpetually to come up with new products and innovations in their sector to stay ahead in the market. Not only funding for innovations is indispensable, but also protecting them with a proper patent program and maintaining them is of utmost importance.
In general, when we look at the value of a company, the products and physical assets of the company pop up right away in our minds. But we often forget the Intellectual properties of the company which are the most valuable intangible form of assets. Besides the protection that patent offers we are here to look at its role in the market share of a company.
Patent vs Market share
Companies opt for patenting to avail the inventions for their use, to attract potential investors and to prevent competitors from using them. Let us have a glance at how the power of patents can be used to increase the market share of a company.
Patenting New Products
Patenting a newly designed or manufactured product that will be first in the market is essential. These patents will record the company as the pioneer and increase their margins thereby, hiking their market shares.
Technology-driven patents
In 2016 The Economist came up with a study on the impact of patents in market concentration. It was found that half of the organizations that gained exceptional profits are technology-related firms where Intellectual Property Rights have a crucial role. The major values for technology-intensive companies are their patent records. The more technology they legally own the better is their market share value. Sometimes, this intangible asset can also be used to attract investors to the firms.
Texas Instruments, a semi-conductor designing and manufacturing company engaged in patent licensing to save itself from bankruptcy and emerged successful with a huge amount from royalties.
Proprietary Advantage
Patenting gives the company a proprietary advantage on the product, granting them the sole ownership of their product in the market. This can be of immense value to the market share of the organization and also give the much needed competitive edge for the organization.
The photocopying firm Xerox was the king of the photocopier market for more than twenty years generating massive profits.
Blocking competition
Many large scale reputed companies use patents as a defensive strategy from their competitors. Patenting their new ventures and products leaves little or no room for competitors to follow the lead granting the company a remarkable market share value.
One such instance is when Avery Dennison Corporation ventured into manufacturing films for labels. They filed as many patents for their technology, process, and design strengthening their invention and restricting any of their competitors to venture into the field.
Patent Analysis
Keeping track of the patents filed by the organization and studying the net worth and revenue they can generate is one of the best practices in the patent program of a company. This deep analysis will aid the companies in understanding the market and keeping touch with the latest trends enabling them to come up with innovative products.
Amati Communications, the firm involved in modem technology suffered a loss of $30 million once in its expenses and sales. However, their patent in Digital Subscriber Line Technology was acquired by Texas Instruments which generated unexpected revenue of $395 million to Amati Communications. This is a remarkable instance where patents not only saved the company but also increased their market share value.
Patent Licensing
Patents of novel ideas and designs that cause a huge socio-economic impact can be of great use. They can be offered for licensing to bring in cash flow and investments increasing the marketing value of a company.
The telecommunication company Ericsson’s shares rose by 8% when it got into a deal with Apple for patent licensing in 2015.
Patent Selling
Selling patents can hike the market share of a company unimaginably. The shares of America Online (AOL), hiked by 43% when they signed a deal with Microsoft to sell more than 800 of their patents worth $1.1 billion.
Not realizing the importance of having a proper patent program in an organization can lead to nightmarish outcomes. Kodak, one of the top companies in photography technology ignored filing a patent for its instant photography technology. Polaroid, a much smaller firm obtained patent later for the same technology and filed a patent infringement suit on Kodak. Kodak suffered terrible financial losses closing its plants and paying $925 million as damages.
It is clearly understood that patents offer protection for the products and also create a noteworthy economic impact to the organization. It is high time both large- and small-scale firms create patent programs and strengthen their existing patent portfolios to boost their market share value.
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