SMEs: why avoiding patents over fear of litigation is a strategic mistake

One decision that frequently arises is whether to apply for a patent. Some SMEs shy away from doing so, not because their inventions lack merit, but because they fear the potential cost of patent litigation. While these concerns are valid, choosing to not apply for a patent for this reason alone is often a strategic mistake.

 

The misconception: patents necessarily mean litigation

It’s true that patent litigation can be expensive, with costs running into the millions in some high-profile cases. This reality has led to a perception that holding a patent is more liability than asset, especially for companies that don’t have the legal budgets of larger competitors. However, this mindset misunderstands what patents are primarily for.

 

Patents are shields, not just swords

The core purpose of a patent is to provide exclusive rights to an invention for a limited time. This exclusivity acts as a barrier to entry for competitors and can significantly increase the valuation of a company. It signals to investors that the company has protected and defensible IP.

 

A patent doesn’t obligate the holder to litigate. Many companies use patents as deterrents rather than weapons. The simple act of owning a patent can discourage infringement and create negotiating leverage if disputes arise.

 

Additionally, patents are frequently used in cross-licensing agreements and can serve as valuable bargaining chips in partnerships or M&A transactions.

 

The bigger risk: having no IP protection

Choosing not to file a patent out of fear of potential litigation may save money in the short term, but it exposes the company to significant long-term risks:

 

Copycats: Without IP protection, a competitor can replicate your product and scale faster than you.

 

Investor scepticism: Many investors view a lack of IP as a sign of vulnerability or weak strategic planning.

 

Lost licensing revenue: Patents can generate revenue through licensing deals, something impossible without IP protection.

 

Acquisition hurdles: Acquirers often seek a strong patent portfolio to justify premium valuations or secure strategic advantage.

 

Managing litigation risk intelligently

Litigation risk is real, but it can be managed:

 

Draft strong patents: Work with experienced patent attorneys who understand your business and can draft claims that are defensible yet not overly broad.

 

Use defensive publishing where appropriate: If patenting isn’t viable, consider publishing technical disclosures to block others from patenting the same idea.

 

Consider IP insurance: Some companies invest in IP litigation insurance to mitigate the financial risk.

 

Final thoughts

Avoiding patent filings solely because of fears around litigation ignores the broader strategic benefits and protections that patents afford. While cost concerns are valid, the smarter move is to pursue an IP strategy tailored to your business goals and risk tolerance.

 

For more information please contact Olivier Martinez.

 

This briefing is for general information purposes only and should not be used as a substitute for legal advice relating to your particular circumstances. We can discuss specific issues and facts on an individual basis. Please note that the law may have changed since the day this was first published in June 2025.