Intellectual Property as Business Assets - A Cost Benefit View

New business ventures have a lot of challenges and entrepreneurs need to responsibly plan on the costs of protecting their Intellectual Property (IP). If you have a great product or a new process, a patent may be the ideal protective shield to ensure your ideas and products aren’t infringed upon, but the costs can be significant, especially if you are looking at the global market. While a registered trademark for your business name, logo, or product name may be less expensive, you also may not have built up the reputation to the point where the cost is warranted. That being said, a patent will expire, while a trademark can remain in effect indefinitely with continuous use.

This means that your patent value will eventually expire, while the trademark for your product or business name is significantly more valuable than the patent was because your reputation in the market exceeds the product itself. An example of this is the value associated with brands where the patents may have expired but the brand name outsells the generic versions due to brand recognition and the associated quality or status of that brand. This is common in pharmaceuticals and clothing brands where quality and composition may be similar to cheaper or less known generic versions, but the brand name is significantly more valuable or expensive. Some common examples include:

1) NyQuill® vs store brand generics

2) Nike® sports headbands vs literally any headband

3) Dasani® water vs water

4) Dole® fruit vs equivalent

5) Golf anything! Golfers are guilty of the most egregious brand loyalty which is golfers who will walk through the weeds looking for their lost golf ball and refusing to pick-up a found ball because it isn’t “their” brand, while ignoring the fact that “their” brand ended up in the tall grass in the first place. Why do we do it, because we have confidence, however misplaced, that “our” brand will give us the best chance to hit the fairway and play well.

We aren’t saying this is bad, in fact this is the loyalty that every company wants. They want their name to be associated with quality and trust so consumers will pass by a lower cost substitute because they trust and know what to expect from their brand. Customers also benefit because they can buy confidently and judge the value of visually identical goods because they trust the source.

When your patent expires on a great product, the market is flooded with generic versions, but if you built a reputation during the patent lifetime you can defend your market share because customers may doubt the quality of the replacement. The patent gives you a head start, and it likely is more important early on, but the reputation you build in your trademark will often pay dividends well beyond the patents expiration. Should you sell your company, the strong reputation you have in your trademark may easily outshine your patent portfolio when the purchaser is looking at the longevity of your business.