The Value of Patents in The World of IT

MARK TERRY, ESQ.

Large technology companies build patent portfolios not only to protect research and development, but also to strengthen their position in financing, acquisitions, licensing, and litigation.

Alibaba’s expansion of its U.S. patent portfolio before its initial public offering illustrates the role patents can play in reducing competitive risk and supporting enterprise value.

Patents may be used offensively against competitors that copy protected technology and defensively when another company asserts infringement. Companies entering public markets can be particularly vulnerable when their portfolios are thin.

Twitter and Facebook each faced patent pressure around the time of their public offerings and later acquired substantial patent portfolios. Similar transactions involving IBM, Yahoo, and Google show that patents can become valuable strategic assets even when the owner does not manufacture the patented product.

For technology businesses, a deliberate patent strategy can help preserve market position, create licensing opportunities, increase transaction value, and provide leverage when disputes arise.