Inventions are intangible assets

Idea creation, while important, is not the primary goal of building your commercially successful business. You should turn your innovation into monetizable business assets. Otherwise, your hard working will become a free development laboratory for your competitors.

Unlike hard assets, intangibles are difficult to measure, to manage, and even to define. They cannot be seen, touched, or weighed, and they generally to not show up on the balance sheets of corporations. If an intangible asset has been purchased by or transferred to another party for consideration, that transaction provides an obvious and useful indicator of the value of your asset.

Patent, trade secret, trademark and copyrights are examples of assets for which property rights are, to some extent, defined and protected by existing legal systems.

Once a patent is granted to an inventor, that patent, just like any other form of personal property, may be transferred, sold, or licensed to others. The stream of economic benefits derived from that intangible idea is vested in the patent holder, who can exploit and protect those benefits.

In addition to patents on inventions, the government also provides trademark protection, which makes it easier for you to create and build reputational capital. Similarly, copyright protections give authors, composers, playwrights, film makers, sculptors, and other artists exclusive property rights over their creations.

Legally defined, a patent is the right to exclude others from manufacturing and selling a defined product, component, or process niche. When framed in a financial perspective, a patent is best defined as the right to a future series of cash flows that may or may not ever materialize. It requires its owner to spend money in order to obtain an underlying asset, and that asset may or may not turn out to be worth more than the money spent to obtain it.

You may invest and transform your patent into a commercial product. However, it does not tell you whether these cash flows will amount to more or less than the cash outlay needed to effect the transformation. Indeed, the eventual value may turn out to be zero. In other words, a patent is the right to a future asset which may or may not have any value.

Licensing out your patent is other option to obtain cash flows without the need of cost product commercialization.