The business case for building a patent portfolio

Patents are often perceived as an expense reserved for large technology companies or pharmaceutical giants. In reality, businesses of all sizes and across all industries use patents as strategic assets to generate measurable financial returns, deter competitors, and position companies for long-term growth. Understanding why others invest in patents is the first step toward evaluating whether your own business should take similar efforts.

Key takeaways:

• Investing in patents is the strategic practice of building and maintaining a patent portfolio to create financial assets, competitive leverage, and defensive positioning.
• Peer-reviewed auction data shows median patent portfolio sales of $183,191, or approximately $276,741 adjusted for inflation.
• The all-in cost to obtain a patent is less than 20% of observed sale prices, a five-to-seven-times return on investment.
• Patents can increase in value over time, with data showing that patents sold after approximately 10 years fetched nearly three times higher prices.⁵
• Companies that do not file patents face growing exposure as competitors build portfolios that can block market entry and limit innovation paths, a risk accelerated by AI.

What does it mean to invest in patents?

Investing in patents should include the strategic, ongoing practice of identifying patentable innovations within a business, filing patent applications to pursue and secure legal rights over those innovations, and building a portfolio of patents that serve multiple business purposes over time. It is not limited to protecting a single breakthrough invention. It is an ongoing operational function, much like sales, marketing, or research and development. It includes systematically harvesting inventions from your teams, filing applications on a regular cadence, maintaining portfolios as appreciating business assets, and leveraging those assets for financial gain.

Patent strategy operates in a competitive environment. Competitors, suppliers, and even customers may be filing patents that could restrict your freedom to operate. Companies that choose not to participate are not neutral observers; they are exposed participants without protection.

Patents have real, measurable market value

One of the most persistent myths about patents is that their value is speculative or impossible to quantify. In fact, peer-reviewed academic research has studied actual patent sale prices – these are not estimates or projections, but real transaction data from public auctions.¹

Between 2006 and 2008, the auction firm OceanTomo conducted eight live public patent auctions,² representing the first opportunity for researchers to study patent sale prices with academic rigor. Of the 638 lots listed for auction, approximately 42% were sold, resulting in 253 completed transactions, covering 510 United States patents.¹ The results were striking:

• Portfolio lots (groups of related patents) sold at a median price of $183,191 and a mean price of $360,046.
• Single invention lots (individual patents) sold at a median price of $112,083 and a mean price of $285,657.
• Across all lots sold, patents at auction averaged approximately $147,000 per transaction, a figure that is four to seven times greater than the all-in cost of obtaining a patent.¹

Adjusted for inflation to present-day dollars, those portfolio figures translate to approximately $275,000 at the median and $540,000 at the mean.¹

These numbers are not theoretical projections. They reflect what buyers in arms-length transactions actually paid for patent rights at public auction, and auction prices are widely considered to represent the lower end of patent valuations compared to private strategic sales.¹

The cost-benefit case is compelling

The all-in cost to obtain a patent, including government filing and maintenance fees, attorney fees, and administrative costs associated with implementing an invention harvesting process, is routinely less than 20% of the prices observed in these academic studies. In other words, for every dollar spent on obtaining a patent, the market has demonstrated a return of five to seven times that investment at auction.

Even applying conservative risk adjustments, the economics remain favorable:

• Only 42% of patents auctioned actually sold, so one could discount the average $147,000 auction price by that sell-through rate, yielding a risk-adjusted value of approximately $62,000 per patent.¹
• Approximately 80% of patent applications are ultimately allowed by the U.S. Patent and Trademark Office, so a further adjustment yields roughly $50,000 in expected value per application filed.
• Even at this most conservative estimate, the expected value would regularly exceed the all-in cost of obtaining the patent.¹
• The above figures likely understate true patent value. Patents sold at auction typically attract lower prices than those sold in private strategic transactions, where a buyer has specific commercial motivation and is willing to pay a premium for exclusivity.

Older patents can be worth more, not less

A common misconception is that a patent’s value declines as it ages. Academic research tells a different story.⁵ Change-point analysis of the auction data revealed that single-invention patents sold approximately 10 years after the grant date fetched significantly higher prices than those sold earlier,⁵ with mean prices jumping from $180,550 before the change point to $496,190 after.

This finding has a straightforward explanation: as an invention matures and proves its commercial relevance in the marketplace, buyers gain confidence in the patent’s enforceability and revenue-generating potential.

The AI revolution is accelerating the arms race

The landscape for patents is shifting rapidly as artificial intelligence advances. AI-related patent filings have surged globally, with generative AI patents alone increasing by over 800% since 2017.³ Companies across every sector, from healthcare and manufacturing to finance and logistics, are aggressively patenting AI-driven innovations³ to secure a competitive advantage. In addition, AI tools are expected to make it easier (and less expensive) to file patents.

This creates a dynamic in which companies that do not file patents face growing exposure:

• Competitors are building patent portfolios that can be used offensively to block market entry or demand licensing fees.
• Defensive patenting has become a standard strategy, where companies build portfolios specifically to deter patent litigation from competitors and negotiate cross-licensing agreements.
• AI is accelerating the pace of innovation, meaning that companies without patent protection may find their core processes and technologies exposed to claims by others who file first.

The U.S. Patent and Trademark Office has confirmed that AI-assisted inventions are patentable, provided there is significant human involvement in the inventive process.⁴ This means companies leveraging AI tools in their research and development are fully able and increasingly expected to protect those innovations through the patent system.⁴

Why companies choose to invest in patent strategies

Businesses that actively pursue patent protection do so for a combination of financial, strategic, and defensive reasons:

1. Revenue generation. Patents create direct revenue streams through licensing, sales, or litigation recoveries. Academic data shows that even a single patent can command a six-figure sale price.
2. Competitive moats. A patent gives its owner the exclusive right to prevent others from making, using, or selling the patented invention for 20 years from the filing date. This exclusivity can define market position.
3. Companies with robust patent portfolios are far less likely to be targeted by patent infringement claims because they possess the ability to counter-assert their own rights.
4. Valuation and investment. Patent portfolios are tangible assets that increase company valuations, attract investors, and enhance acquisition prices.
5. Strategic negotiating power. Patents provide leverage in licensing negotiations, joint ventures, and partnership discussions, particularly in industries where freedom to operate requires access to others’ intellectual property.

The risk of sitting on the sidelines

Companies that choose not to file patents are not simply maintaining the status quo. They are falling behind. In an environment where competitors are actively building patent portfolios, a company without patents has no defensive position from which to negotiate. If a competitor asserts a patent against your business, without your own portfolio, you have no counter-leverage. You face the choice of paying licensing fees, redesigning your products, or exiting the market.

The advent of AI compounds this risk. As companies increasingly use AI to accelerate innovation, the volume of patent filings is growing exponentially.³ Those who do not participate in this system will find themselves surrounded by competitors who have secured exclusive rights to adjacent technologies. This scenario limits future innovation paths and creates ongoing legal exposure.

Getting started does not require a fortune

One of the most significant barriers to patent filing is the perception of cost. Yet the data demonstrates that the cost to obtain a patent, including all government, legal, and administrative expenses, represents less than 20% of the median sale price observed in academic research.⁵ Modern tools, including AI-powered platforms for harvesting inventions, can further reduce the administrative burden and costs of identifying patentable innovations within an organization, making the process scalable even for companies with limited research and development budgets.

The question is not whether patents have value – the data conclusively answers that. The question is whether your company can afford to leave that value unrealized while competitors invest in building their own intellectual property positions.

Sources:

1. Caviggioli, Federico, and Elisa Ughetto. “Buyers in the Patent Auction Market: Opening the Black Box of Patent Acquisitions by Non-Practicing Entities.” Technological Forecasting and Social Change, Vol. 104 (2016), pp. 122–132. https://ideas.repec.org/a/eee/tefoso/v104y2016icp122-132.html
2. Ocean Tomo. Intellectual Property Auctions and Patent Transactions. https://oceantomo.com/services/bid-ask-market/
3. World Intellectual Property Organization. Patent Landscape Report: Generative Artificial Intelligence. 2024. https://www.wipo.int/publications/en/details.jsp?id=4745
4. S. Patent and Trademark Office. Artificial Intelligence Resources (including guidance on AI-assisted inventions and inventorship). https://www.uspto.gov/initiatives/artificial-intelligence
5. Vimalnath, P., Gurtoo, A., & Mathew, M. The relationship between patent age and selling price across bundling strategies for United States patents, predominantly for computer and communication technology. World Patent Information, 48 (2017), 1–11. https://doi.org/10.1016/j.wpi.2016.12.001