Patents can be a low-cost, low-risk way for companies to diversify beyond their core markets. By securing rights to inventions—even those they don’t plan to commercialize directly—businesses can generate licensing revenue, sell patents for profit, or use them as leverage in negotiations. Compared to the high costs of developing and launching new products, maintaining patents offers significant upside potential with minimal downside, making them a strategic tool for growth and resilience.

 

Even though inventions may be outside a company’s core space, it may be worthwhile pursuing patents since they can add tremendous upside to a company’s value with limited downside.

Did you know that patents offer a company a low-cost and low-risk way to enter a market and potentially earn a high return on investment? In fact, they can offer a way to diversify revenue streams outside traditional markets.

 

Why Patents Matter Beyond Products

Patents provide their owners with the right to exclude unauthorized parties from using the inventions claimed within them. This exclusionary right is what gives patents their power. It’s important to note that patent owners don’t actually have to make or sell a product to benefit—sometimes the real value comes from preventing others from using the invention.

This means a company can hold patents that cover applications outside of its core market, even if it never intends to launch a product there. For companies with limited resources, this can be a smart way to stake out a position in new markets without taking on the cost and risk of direct expansion.

 

A Cost-Effective Diversification Strategy

Launching a new product in an unfamiliar market can require years of development, regulatory approvals, testing, and costly marketing campaigns—often running into millions. By contrast, filing and maintaining a patent over its lifetime is a fraction of that cost.

If the invention covered by the patent becomes highly valuable in a market the company doesn’t serve, the patent itself can still generate returns. This can happen through:

  • Licensing the patent to companies operating in that space.

  • Selling the patent outright for a profit.

  • Using it as leverage in negotiations or as a defensive tool against competitors.

In this way, patents can act as a financial hedge, giving companies exposure to opportunities outside their core without overextending operationally.

 

Thinking of Patents Like Options

A useful way to understand this is to think of a patent as a call option on an invention. If the invention gains traction in the market, the patent becomes valuable—often worth many times its original filing cost. If the invention doesn’t succeed, the company’s loss is limited to the relatively modest cost of filing and maintaining the patent.

Like call options, patents also have an expiry date—typically 20 years from filing—so timing matters.

 

The Strategic Takeaway

Pursuing patents outside a company’s core space can diversify revenue streams, offset risks in traditional markets, and create assets that hold value independently of product launches. With relatively low cost and significant upside potential, patents are not just legal protections—they’re strategic tools for growth and resilience.

 

Patents aren’t just protections—they’re growth tools. Whether through licensing, sales, or strategic leverage, Stratford can help you maximize the upside of your portfolio. Reach out to our team to start positioning your IP for new markets.

 

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