- Tangible can be defined as, “a physical thing.”
- Intangible can be defined as, “something without physical substance.”
A fundamental paradox at the heart of intellectual property law is that part of it is controlled by the physical laws of the natural world, while another part exists purely in an invisible space.
Intellectual property is much more than just an abstract idea floating around in that invisible space.
For a patent to be granted, that ethereal idea must be transformed into enforceable “metes and bounds.” Like it or not, an inventor usually needs a lawyer to stand up in federal court and argue that someone is trespassing on those invisible boundaries (the alleged infringement). This unique combination of the abstract and the concrete creates one of the cornerstones that ultimately benefits “We the People.”
The Limited Patent Monopoly
The limited patent monopoly gives the first to market an upper hand on the competition. Without patent rights, technological advancement would grind to a halt. Many argue against the patent system, but do we really want to go back to riding horses and bathing once every few months? Most people would think that stinks!
Currently, the United States of America is a semi-regulated capitalistic country. It must be this way; unregulated capitalism historically results in a very few owning almost everything while everyone else is left poor. Our history from the 19th and early 20th centuries showed us exactly what happens without smart regulations. Patents are a key part of that balanced framework.
Rights Become Tangible When Enforced
When a third party creates a physical product or process that too closely resembles your patent claims, a judge or jury will determine if there is an infringement. Armed with a successful judgment, you can legally stop that third party from:
- Manufacturing your invention
- Selling or offering it for sale
- Using it in commerce
- Importing it into the United States
The power to stop an infringer, paired with the payment of damages, can be the biggest dog in the room for advancing your company to the next level. A court-ordered injunction and cash settlement are real, physical results flowing directly from an intangible patent.
The Tangible Value of the Patent Outside the Courtroom
You don’t always have to go to court to feel the physical power of a patent. In the daily business world, that intangible asset creates tangible value in three distinct ways:
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The License
Upfront fees, milestones, and royalties are just a few of the financial perks. They can be sliced and diced however the parties agree. With or without your own manufacturing or distribution facility, a patent allows you to create a very real, very physical revenue stream.
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Investment Capital
In return for selling equity to investors, hard capital is deposited directly into your corporate treasury in exchange for shares—without a bank collecting interest on a loan. However, your Securities and Exchange Commission (SEC) filings must be pristine. Without one or more patents defending your market position, it is highly unlikely sophisticated investors will back the future of your company.
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Collateral for Corporate Growth
Sometimes, the “just right” patent portfolio is sufficient collateral to secure a major loan. Public bankers, private bankers, investment bankers, and even insurance companies generate loans backed by intellectual property. Without the patent(s), this type of cash influx is often impossible.
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Sale
The patent’s intangible rights can be sold to a third party. This also generates tangible cash in the hand of the former owner.
The Takeaway
In the business world, things we cannot see, touch, hear, taste, or smell can become extremely valuable. Of course, they may not—it all depends on how you protect them.
From our experience, when companies are acquired, those with robust Intellectual Property portfolios realize significantly more cash than those without. That very tangible increase in cash for the seller is the direct result of those intangible patent claims.
Ask Us Anything… about Intellectual Property!
Business Patent Law, PLLC is headquartered between Louisville and Lexington, Kentucky, serving a diverse range of clients—from innovative startups to successful companies of several decades whose business interests cause BPL’s practice to span across seventeen time zones.
If you have a topic or question you would like our editorial staff to address, please send us an email. Business Patent Law, PLLC provides intellectual property and business counsel. If you need assistance, contact us today.
Counseling the Creative®