How to Explain Your Patent to Investors and Buyers

Investors, buyers and licensees want four answers: what the patent actually covers (the claims, not the description), who owns it, how long it lasts and whether it is in good standing, and how it connects to revenue. Give them a one-page summary, a plain-English explanation of the main claim, and the documents to check it for themselves.

This guide is general information, not legal advice; talk to your patent attorney about your situation.

What they are really asking

Behind every question about your patent are five simpler ones:

1. Is it yours? Is the chain of ownership clean and recorded?
2. What does it stop others from doing? That is what the claims define.
3. How long, and is it alive? Expiration date, term adjustments, maintenance fees.
4. Does it matter commercially? Does it cover your product, a competitor's likely product, or a path the market will take?
5. What could go wrong? Prior art, challenges, and anything that limits the claims.

It is worth taking seriously. A study published in The Journal of Finance used the luck of which examiner an application drew to estimate the effect of a first patent on startups. Startups that won a first patent had 55% higher employment growth and 80% higher sales growth five years later, and easier access to investors.

Lead with the claims, in plain English

The claims set the legal scope of the patent. The description, drawings and abstract help explain them, but the claims are what an investor's patent counsel will read first.

• Start with the independent claims. They stand alone and are the broadest. Dependent claims add details to a claim they refer back to. Our guide on reading your patent explains the difference.
• Break claim 1 into elements. List each thing the claim requires. In general, a product has to include every element of a claim to infringe it, so each element is also a possible design-around. Know which elements a competitor would find hard to avoid.
• Translate, don't inflate. Say "Claim 1 covers a system that does A, B and C," not "we own the whole market." Anything you overstate will surface in diligence and cost you credibility.
• Show a figure. The main drawing with its reference numerals makes the claim concrete in seconds.

Build a one-page patent summary

Keep it to one page. Link to the full patent and file history for anyone who wants depth.

Have the documents ready

• The grant. Download the eGrant PDF from Patent Center.
• The file history. The back-and-forth with the examiner, also in Patent Center. Amendments and arguments made to get the patent allowed can narrow how the claims are read, so read it before someone else does.
• Ownership. Assignments must be in writing. An unrecorded assignment can be void against a later buyer unless it is recorded at the USPTO within three months or before that later purchase.
• Fee receipts, licenses and encumbrances. Any existing license or security interest affects what a buyer gets.
• Opinions from counsel. These may be privileged. Ask your attorney before sharing them.

Tailor it to the audience

• Investors want to know how the patent protects the business: which product it covers, what it would cost a competitor to design around it, and what else is coming (continuations, new filings).
• Buyers of the patent itself care most about remaining term, clean title, any existing licenses and evidence that products use the claims. Claim charts that compare a product to the claims are usually prepared by counsel.
• Licensees want to know which of their products or plans the claims reach, what field and exclusivity they would get, and how you arrived at a price. Valuers commonly use cost, market (comparable deals) and income approaches; WIPO's valuation primer explains each.

Show, don't just tell

A two-minute walkthrough of the main claim and figure often does more than a slide. You can record one yourself, or use a free instant trailer as a starting point. PatentFilm's Documentary style highlights the claim language line by line and animates the real patent figures, and the Feature package includes a private watch page you can send to investors or buyers (pricing).

Mistakes to avoid

• Calling it bulletproof. Granted patents can be challenged at the USPTO's Patent Trial and Appeal Board or in court.
• Confusing a patent with freedom to operate. A patent is a right to exclude others. It does not guarantee you can sell your product without infringing someone else's patent.
• Quoting a value without a basis. Show how you got the number, or leave it out.
• Hiding weaknesses. Diligence will find them. Addressing them first builds trust.

Sources

• USPTO, Managing a patent: https://www.uspto.gov/patents/basics/manage
• 35 U.S.C. § 112, claims (Cornell LII): https://www.law.cornell.edu/uscode/text/35/112
• 35 U.S.C. § 154, contents and term of patent (Cornell LII): https://www.law.cornell.edu/uscode/text/35/154
• 35 U.S.C. § 261, ownership and assignment (Cornell LII): https://www.law.cornell.edu/uscode/text/35/261
• USPTO, Maintain your patent: https://www.uspto.gov/patents/maintain
• USPTO, Kind codes (including inter partes review certificates): https://www.uspto.gov/learning-and-resources/support-centers/electronic-business-center/kind-codes-included-uspto-patent
• Farre-Mensa, Hegde and Ljungqvist, What Is a Patent Worth? Evidence from the U.S. Patent "Lottery" (NBER working paper; The Journal of Finance, 2020): https://www.nber.org/papers/w23268
• WIPO, IP Valuation Basics for Technology Transfer Professionals, valuation methods: https://www.wipo.int/web-publications/intellectual-property-valuation-basics-for-technology-transfer-professionals/en/3-ip-valuation-methods.html