An earlier version of this article was published on 29th October 2020, which erroneously credited Onyinyechi Ukegbu as the author to the said article. This has been corrected to reflect Mr. Afolabi Caxton-Martins and Ms. Uzoamaka Emerole as the true authors of this article.”
Intellectual property is important to businesses, and its effective use can contribute heavily to success. Not only should a business procure the requisite protection for its intellectual property, it is expected that such a business should understand its significance, identify its niche markets and adopt a strategic approach that will enable it obtain value from its intellectual property while minimising costs.
The Patents and Designs Act (“The Act”) which governs the registration of patents in Nigeria confers on a patent owner, a legal right to prevent others from making, using, offering for sale, selling or importing the patented invention without his permission i.e. the commercial exploitation of an invention by a third party. Inventions may include products, processes and methods.
When looking at the role of patents in businesses, we observe that not all businesses develop patentable inventions. However, with the changing times and the constant increase in competition in the industry, patents appear to have become a key factor for most businesses, mainly because it is obtainable for any area of technology.
Patents do not only protect innovative technology, but it also helps to expand market share. To be competitive, an individual inventor, large or small businesses ought to have a set plan or commercialisation strategy that can help increase their value inclusive of their product or processes. In developing a patent business strategy, a business must consider some or all of the following questions:
- How do we maintain market or product dominance?
- What steps can be taken to prevent counterfeits or copying?
- How do we hedge against competition lawsuit?
- How do we attract investment and valuation?
- How do we increase our negotiating power?
Savvy Patent Business Strategies
In-depth knowledge of the invention: Understanding the invention’s significance is vital; what problems it intends to solve, its commercial potentials and ultimately, whether the product or process may be worth protecting as a patent.
Proprietary strategy: If the invention is remarkably viable and meets with the eligibility requirements, then a business may consider registering the invention in Nigeria and in other countries where they plan on doing business. This is because by obtaining the legal right as an owner, commercial value and advantage are achievable, and this will ultimately lead to an expansion of their market share and profit margin after having invested a considerable amount of money and time in developing such an innovative product or process.
Potential business partners, investors or shareholders would also usually perceive a portfolio of patented inventions within a target business, to be a demonstration of its level of skill and technological capacity. This may prove useful for raising funds finding business partners and raising the business’s market value.
Please note that while registration of an invention is important, there may arise situations whereby disclosure of an invention prior to filing a patent application is inevitable, especially in cases where a patent owner will be required to disclose relevant details of his invention to a potential investor or a business partner. In this case, a confidentiality or non-disclosure agreement should be executed prior to any discussions between the parties.
Commercialization/Monetization: Commercialising patents is about getting a business’s products or services into the market and earning revenue from it. So, a business’s commercialisation strategy will depend on many variables such as a business’s specific circumstances, its organisaional type, business capabilities, the competitive environment, prospects of the relevant market and technology as well as access to finance.
Most financiers, entrepreneurs or investors prefer not to participate in a commercialisation venture unless ownership of the relevant IP is ‘clean’, or uncomplicated. Emphasis is usually placed on the need to register and obtain a grant of a patent over an invention. This also helps to increase the negotiating power of a business.
Questions that a business should address are whether they have funds for manufacturing and promoting a product or process? If yes, commercialisation can be done inhouse whereby the product is developed to a market-ready state without any external ownership of the project. In this case, the business bears all the risks associated with launching a new product. It also means that if it is successful, they reap all the benefits.
If a business lacks the requisite resources or experience to develop and market a patented product or process, licensing can be an effective strategy. Licensing as an option, presents such a business with an opportunity to grant consent to a more established brand to use its patented invention in exchange for royalties which can be paid by the licensee at regular intervals. A number of international technology companies no longer manufacture products but focus more on innovating and licensing.
For start-up businesses, licensing is typically the fastest way to generate cash flow. We find that Start-ups are often preferred targets for interested venture capitalists who will want to invest in the development of patented inventions created by the organisation. Licensing may enable such start-ups to reinvest in further research and development and use revenues earned from monetising their patent to finance further research and development, while the licensor also gains rapid expansion of business with minimal capital expenditure. It then becomes a win-win for both parties.
The relevance of patents in business cannot be over-emphasised. Individual inventors, small and large businesses are provided with an opportunity to generate significant value and returns on the investment that must have gone into developing new technology and obtaining a patent over it. However, an intelligent strategy has to be adopted in an effort to actualise this; one that can lead to an increase in the overall performance of the business and favourably react to unexpected developments and new market conditions.
Authors: Afolabi Caxton-Martins & Uzoamaka Emerole
Afolabi Caxton-Martins is a Founding Partner of ACAS Law and Uzoamaka Emerole is a Senior Associate of the firm.