Hedging your Bets with Patents

This article was published more than 1 year ago. Some information may no longer be current.

In a previous post, we explained how patents can be a low-cost way of addressing a market outside of a company’s typical core markets, without having to actually introduce a product. Patents can also be used by a company to “hedge its bets” within a market.  Here’s how:

Let’s assume that a company, call it Natram Inc., is developing a new product, and needs to solve a particular design problem. Possible solutions A, B and C are put forward. After much deliberation, the company chooses to go forward with solution A.

Unfortunately, conditions change and solution A turns out not to be the best approach. Worse still, a competitor anticipating the pitfalls of solution A launches its own product using solution B.

Had Natram Inc. been thinking ahead, it could have retained its competitive advantage in this market by hedging its bets using patents. If it had patented each of solutions A, B and C, even though it only chose to implement the first approach, it could have excluded competitors from using any of its ideas in products or deployed the patents to extract licensing revenue from them. Furthermore, Natram would have retained the option to implement solution B or C later on if necessary.

Companies should remember that patenting innovations confers “monopoly rights” which can exclude competitors from taking the same route, thereby protecting competitive advantage in the marketplace. It also provides opportunities to earn revenue by selling licenses to patents that cover the best solutions.

In effect, patents provide a way for a company to hedge its bets when deciding between different solutions to a particular design problem. Product development and new market entry is enough of a gamble.  It’s nice to know that the intelligent use of patents can help stack the odds in your favour!