Patent Basics: What is a Patent?

In essence, a patent is a contractual agreement between an individual and the US government.  In exchange for disclosing your invention to the government and enabling it to publish your invention, the government will negotiate in good faith regarding (1) whether to issue you a property right relating to your invention and, if so, (2) the scope of that property right.

The property-right concept stems from a tradition rooted in real property.  If you own a home, as an example, you can reside there and furnish it to your liking.  There is no requirement, however, that you actually reside in or furnish the home.  As such, a property right does not require or obligate the owner to proactively act on the given right.

Instead, a property right is defined as a privilege to prevent others from trespassing on that right.  If you wish to prevent someone from entering your home, you are legally entitled to prevent that person from doing so.  And if that person makes an unwelcomed entrance, he is trespassing and you are legally entitled to defend yourself.  And notably, the US government is obligated to help you enforce that property right, such as through law enforcement and the court system.

This same property-right concept flows to the intellectual-property arena.  There is no requirement that you, for example, develop or market the invention relating to the patent asset, but you are legally entitled to exclude others from practicing the invention defined by the patent asset.  Most importantly, the US government is obligated to help you enforce that property right when it is being infringed (a rough equivalent of trespass).  Specifically, if you make a claim of infringement against a third party and if a court rules in your favor, the government will prevent that party from continuing the infringing activity or force them to pay royalty fees for continuing the activity.

With respect to monetization, the important takeaway is that the value of a given patent ultimately stems from government enforcement, or at least the threat of government enforcement, of the property rights associated with the asset.  In fact, all value of patent assets and monetization activities relating thereto ultimately derive from government enforcement-activity of intellectual property rights.

To accurately valuate a patent asset, you need a reliable methodology to predict whether a court will enforce your property right against a party you believe to be infringing the patent asset.  If a court will enforce the property right, there is value; if not, there is no value.

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