How an IP Portfolio Attracts Funding and M&A Suitors
Maintaining a complete and current patent portfolio is a great way for a company to improve its chances of a potential acquisition deal. In intellectual property (IP) centric industries like technology and biotechnology, a patent portfolio is also vital to the growth and survival of a company, and can provide leverage for collaborative endeavors with other businesses. Today’s post will discuss these topics, focusing on how an IP portfolio attracts funding and M&A suitors.
A patent portfolio can serve at least four major functions for a business. It can be used for offensive, defensive, strategic, and leadership purposes. As an offensive tool, the portfolio is used to attack competitors in several ways. The strength of a company’s IP portfolio allows it to protect market share, to increase market reach, and to establish a monopoly. Since holding enforceable patents is a prerequisite to wielding patents for offensive purposes, offensive aspects of patents are generally the province of mature companies. Early stage companies rarely have issued patents to enforce, but they can still benefit substantially from developing an IP portfolio.
From a strategic standpoint, a well-conceived portfolio of IP assets can give a company several advantages, including some that are salient for startups. Securing funding is a top priority in the early stages of business, and to that end, an IP portfolio can help. Many angel investors, as well as the venture capital firms encountered in later financing rounds, will be more attracted to a business with a solid foundation and development plan for the company’s portfolio of IP assets.
The value of a portfolio also creates opportunities for exit events including mergers and acquisitions. A potential acquirer may be trying to fill a technology gap, secure a quick and competitive entry to a new market area, enter a growing market, or simply broaden its own IP portfolio. The value of the target’s portfolio will depend on many factors that relate back to the total scope and quality of the portfolio.
The first phase in developing a strong portfolio is comprehensive patent coverage for the company’s core technology. The coverage sought should be broad, but it should also contemplate current and future business goals and address potential ways a competitor might legally circumvent the protection of particular patents. In the life sciences sphere, core technology can be covered by addressing claims related to compounds, use, manufacturing, diagnostics, methods of treatment, and all other aspects of any inventions. As the products evolve, so should the current portfolio; this helps to incrementally expand the company’s footprint, which will further increase a company’s profile as an acquisition target.
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