A right to exclude, not a right to practise
A patent does not give you permission to make anything. It gives you the right to stop others from making, using or selling the claimed invention for a limited term — twenty years from filing, subject to renewal fees that escalate annually.
That distinction matters commercially. You can hold a patent on an improvement and still be unable to build the product because someone else holds the patent on the underlying technology. Cross-licensing exists to resolve exactly this.
Value is enforcement value
A patent's worth is a function of what it would cost an infringer to lose. That means: how clearly the claims read onto products that are actually being sold, how large those products' revenues are, how likely the patent is to survive a validity challenge, and whether you have the money to litigate.
UK and European patent litigation runs to hundreds of thousands of pounds; US litigation to millions. A patent held by someone who cannot fund enforcement is worth substantially less than the same patent held by someone who can, which is the entire basis of the litigation funding industry and of non-practising entities.
The portfolio effect
Individual patents rarely sell for much. Portfolios do, because they provide freedom to operate and defensive leverage. When Nortel's patent portfolio sold for $4.5bn in 2011 and Google bought Motorola Mobility largely for its patents, the buyers were acquiring negotiating position in the smartphone patent wars rather than specific inventions.
Other IP
Trade marks renew indefinitely and can become extremely valuable, but must be used and defended or they lapse. Copyright is automatic, lasts for the author's life plus 70 years in the UK, and is the basis of the music and publishing royalty markets. Design rights and trade secrets each have their own regimes — a trade secret lasts forever but only until someone independently discovers it.
The UK tax angle
The Patent Box regime allows a reduced rate of corporation tax on profits attributable to patented inventions, which gives UK companies a direct financial reason to patent. R&D tax credits sit alongside it. Both have been tightened after abuse, but both remain significant.
How you would actually trade it
Sales happen through IP brokers, at auction, or in insolvency — patent portfolios are often the most valuable asset in a failed technology company.
Due diligence covers: whether renewal fees are paid and the patent is in force in the relevant territories, the prosecution history, any prior art that threatens validity, existing licences that bind a purchaser, and whether the claims actually cover anything commercially relevant.
Freedom-to-operate analysis before launching a product is the defensive equivalent, and is considerably cheaper than being sued.
What goes wrong
- Invalidity. Patents are revoked regularly; a granted patent is a presumption, not a guarantee.
- Litigation cost can exceed the value of the right being defended.
- Territorial limits. A UK patent does nothing about manufacturing in a country where you have no protection.
- Renewal fees escalate and forfeiture is automatic if missed.
- Design-around. Competitors engineer alternatives that avoid the claims.
- Twenty-year expiry is absolute; the asset amortises to zero on a known date.
This entry describes how a market works. It is not a recommendation, a price forecast, or advice about whether this belongs anywhere near your money. How entries are written.