Why Do Indian Companies Acquire Patents?

This post was last published on May 31st, 2012.

Most people would assume that the answer to the question is obvious. But it is not. Ideally, patents are acquired to gain competitive advantage and through it, business value. In our quest to learn the answer, we have by virtue of studying about a hundred companies of varied sizes, realized that only twenty percent of them actually acquire patents to gain a business advantage. Why then do others invest in patents?

Some of the most common reasons are:

To meet the targets met by the senior management

About eighty percent among the large companies file for patents because they have to meet targets every quarter and every year. Very little or no analysis of patentability and value to business goes into making decisions on filing these patents. Of course, such an analysis does not make sense when there is a sword hanging on your head. And therefore, the quality of patents as a whole is 1 on a scale of 5.

Raise Investment

It is well known that IP in general and patents specifically play an important role in getting investment. Many companies, especially start-ups and ones looking to go public, file patents for this purpose. While emphasizing on filing for patents to show to private and public investors, the value of such patents to business and their strength in the market receives the least consideration. The objective is initially accomplished but most of the companies run into trouble when these patents are tested in the market and the showcased advantage does not exist in reality.

Attorney Advice

Surprisingly, thirty percent of companies, especially small enterprises, have invested in Patents based on attorney advice. It is a well-known fact that very few attorneys in India understand business dynamics and even fewer give business advice. Falling prey to their belief that filing for patents is in general good for business, many small and medium enterprises have filed for patents only to realize later that there is no value in their investment.

Marketing and Business Development Benefits

About four to five percent of companies acquire patents for marketing advantages. Showcasing a patent in marketing materials and presentations establishes innovative capabilities and can provide business leverage. To take advantage of that, a few companies have filed for patents and are not really bothered about acquiring a grant. Based on the response of the patent office, they use tactics to keep their application alive as long as possible.

Government Contracts and Awards

Many government contracts and awards require patent filing or grants as one of the essential criteria and a few companies file for patents for this purpose. These patents help them get awards and contracts or even some times government grants. As the purpose is very specific, emphasis on quality of protection is very low.

Show Off and For Fun

It is surprising but about one to two percent of companies file for patents just to show off that they have IP on their name. There are also a few that file patents for fun. Some to see the process and others to see if there is any value they may be able to gain in the future. For these companies, the cost is a primary factor and quality does not matter.

As you can see, companies file for patents for many reasons other than competitive advantage through exclusivity. There are several other factors that will surely come to the forefront in the near future.

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