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Value of Patents

Originally posted April 1st, 2019 by CytochromeP

 

Some companies in the cannabis industry have large patent portfolios of 60 patent families representing hundreds of patents and applications in different regions or 40 filed patents. Do these numbers mean anything in terms of value? Not alone, the value of any patent is in the contents, where the contents are desirable to others in certain circumstances.

A patent only has value if it’s actively preventing someone from infringing on it. Meaning, someone else must see value in the process/thing you’ve patented. If I own a company operating as a monopoly, patent protection meaningless. If I own a company operating in an active open market the patented process/thing must provide me with a competitive advantage. The greater the competitive advantage the greater the value of the patent. How this breakdown transitions to the real world isn’t as straightforward.

The easiest competitive advantage to compare is cost of identical products. A patented process that produces CBD isolate at $2/g has an advantage if all other methods to produce CBD isolate cost upwards of $2/g. CBD oil, unlike isolate, has many forms depending on how it was processed. The value of the oil to downstream processors and the consumer may not reflect the differences in cost to obtaining certain types of CDB oil. For example, if I own a company baking CBD cookies and my input is oil, will I buy a cruder CBD oil and base my recipe on the lower cost inputs, or will I go with a more expensive ‘higher quality’ CBD oil? If there’s a patent on the process to produce the ‘higher quality’ oil it has no bearing on my decision as a baker to produce cookies from a cruder product. I’ll either pay for a higher quality product and sell it for more or choose the cost savings. I as the baker can modify my process based on inputs. Direct to consumer is a bit harrier as marketing plays a bigger factor in consumer habits than patented processes/things (unless those things being protected are the brand itself, like the Nike checkmark).

My patent series attempts to highlight what each patent or application covers, both strength and limitations. It’s important to understand how the company filing the patent views it as a precautionary measure. It’s easy to write a press release about a patent/application, harder to justify why you’re patenting the process/thing.