Why patents and other intellectual property rights should be part of your business strategy

For Australian startups and growing businesses, patents and other intellectual property rights can do more than prevent copying. They can influence investment, market expansion, commercial negotiations, and a business's long-term value.

In 2001, Australian plumber Brad McCarthy found himself stranded on a remote beach in Queensland's Cape York, struggling for hours to recover his bogged vehicle using a hand winch. The experience prompted a simple question: surely there was a better way?

That question eventually led to Maxtrax, a lightweight vehicle-recovery product designed to help drivers free vehicles from sand, mud and other difficult terrain. The product launched commercially in 2005 and, according to an account published in CPA Australia's In the Black in 2018, reached about 30 countries.

One of McCarthy's early decisions was to seek professional advice about protecting the invention before bringing it to market. The business later pursued patent protection in key markets and developed intellectual property rights tied to its distinctive branding.

The story illustrates something founders often overlook: developing an invention and building a business that can extract lasting commercial value from it are two very different achievements.

An innovative product may attract customers and generate substantial revenue, but commercial success also attracts competitors. Without appropriate protection, a business may discover that others can reproduce the advantage it invested years developing relatively quickly.

Yet protecting intellectual property is not simply about preventing imitation. When understood properly, it is a key part of how a company competes, attracts capital, negotiates with commercial partners, and expands into new markets.

The commercial value of a patent extends beyond stopping competitors.

A patent is often described as a legal monopoly over an invention, but that description can obscure its commercial significance. In Australia, a granted patent provides enforceable rights to prevent others from exploiting an invention within the scope of the patent's claims, subject to applicable legal limitations.

Those rights may help a business preserve an advantage that competitors would otherwise be able to reproduce. However, the commercial value of a patent depends on much more than its existence or the theoretical availability of infringement proceedings.

Consider a startup developing a new medical device that requires substantial investment in research, regulatory approvals, manufacturing and distribution. Without some protection against imitation, competitors may enter the market after the startup has incurred the costs of establishing the technology's commercial viability.

A meaningful patent may help address that risk by restricting competitors' ability to exploit the protected invention. This can improve the commercial justification for investing capital in development, even if the company never brings infringement proceedings.

A patent can therefore influence a business's economics long before it is enforced in court.

That does not mean patents are always commercially desirable. A patent covering a feature that customers do not value, that competitors can easily design around, or that has little relationship to the company's competitive advantage may provide limited economic benefit.

The question is whether the patent rights materially strengthen the company's market position.

An invention need not be complicated to be commercially valuable.

Inventors sometimes assume patent protection applies only to highly sophisticated technologies. In reality, relatively straightforward improvements to existing products can create substantial commercial value by solving an important problem more effectively than available alternatives.

The commercial success of a simple invention may also make it particularly attractive to competitors. If a product can be manufactured inexpensively and customers readily understand its benefits, imitation may become a predictable feature of the market.

However, simplicity does not establish patentability. The invention must satisfy the applicable statutory requirements, including novelty, inventive step and other requirements governing patentable subject matter.

Nor does every commercially successful improvement warrant a patent. The likely scope of protection, the cost of obtaining rights, and the availability of alternative means of competing should all influence the decision.

The timing of patent protection can be as important as the invention itself.

One of the most consequential mistakes founders can make is publicly disclosing a potentially patentable invention before deciding how to protect it.

Researchers and entrepreneurs naturally want to discuss their work with prospective investors, customers and commercial partners. Public demonstrations, product launches, conference presentations and online announcements can generate interest and help establish whether a market exists.

But those activities may also affect patent protection.

Australian patent law provides a 12-month grace period for certain public disclosures, subject to statutory conditions. However, other jurisdictions, including much of Europe, apply more restrictive rules concerning disclosures made before filing.

Consequently, an inventor who publicly demonstrates a technology before filing may preserve some options in Australia while compromising opportunities to obtain protection in commercially important overseas markets.

The practical lesson is not that founders should avoid discussing their inventions. Instead, founders should consider commercial disclosure and intellectual property protection together before the information becomes public.

Confidentiality agreements may help protect sensitive technical information during preliminary discussions, although they are not always appropriate or obtainable. A staged disclosure strategy lets a founder explain the commercial opportunity without immediately revealing the technical details needed to reproduce the invention.

Patent protection should follow the markets in which the business intends to compete.

An Australian patent does not automatically prevent competitors from manufacturing or selling the invention overseas. Patent rights are territorial, meaning businesses must consider protection in the jurisdictions relevant to their commercial activities.

For many startups, protecting the invention in every potentially relevant country would be prohibitively expensive. International patent strategies therefore require difficult decisions about where the available capital is likely to produce the greatest benefit.

A business may prioritise countries with substantial customer markets, key manufacturing centres, or commercially significant distribution networks. The appropriate combination depends on the invention, the company's resources and how competitors might exploit the technology.

A distinction also exists between where a product is manufactured and where it is sold. Patent protection in a major customer market may help prevent infringing products from being imported and sold there, even if they were manufactured elsewhere.

Conversely, protection in an important manufacturing jurisdiction may provide additional opportunities to address infringing production before the goods enter international supply chains.

Neither approach guarantees effective enforcement. Patent owners must consider the cost of legal proceedings, available remedies and the practical difficulty of enforcing rights against particular counterparties.

For a capital-constrained business, the objective should be commercially meaningful protection rather than the largest possible collection of patent registrations.

Europe offers opportunities, but requires careful planning.

The European market shows why international patent strategies should not rely on outdated assumptions about national registration requirements.

Historically, businesses seeking patent protection across multiple European jurisdictions frequently encountered significant validation, translation and ongoing administrative costs.

The European Unitary Patent system, which began on 1 June 2023, has changed that landscape. As at October 2026, a European patent granted through the European Patent Office can, upon a successful request for unitary effect, provide uniform protection across 18 participating European Union member states.

The system can reduce administrative complexity and certain costs, while the Unified Patent Court provides a centralised mechanism for relevant patent disputes. However, unitary protection does not automatically extend to every European country, and centralised enforcement and potential revocation require consideration.

For Australian businesses, the broader lesson is that international protection should form part of an evolving commercial strategy. The existence of more efficient filing or enforcement mechanisms does not itself establish that the relevant markets justify the expense.

The most valuable intellectual property may not appear on the balance sheet.

Patents are only one component of a company's intellectual property and broader intangible asset position.

A business may derive substantial value from trade marks, copyright, registered designs, confidential information, proprietary software, technical expertise, contractual rights and commercially valuable data.

Some of those assets may be formally registered, while others depend on contractual arrangements, secrecy or the continued ability to exploit particular commercial relationships.

Importantly, the economic value of these assets is not necessarily reflected in their accounting carrying amounts. Internally developed brands, customer relationships and other sources of competitive advantage may have substantial commercial significance without being recognised as assets at their estimated market value.

A company might therefore possess valuable intellectual property while presenting financial statements that reveal relatively little about its underlying competitive position.

This is one reason founders should distinguish between identifying an intellectual property right and understanding how that right contributes to enterprise value.

The purpose of an intellectual property audit is to identify what the business actually controls.

Many businesses accumulate valuable intellectual property without maintaining a clear record of how it was created, who owns it or what contractual restrictions affect its use.

A startup may assume that it owns software developed by an external contractor because it paid for the development. A university spinout may depend on technology owned by its originating institution, while a joint development project may produce intellectual property subject to rights held by several parties.

Those arrangements can become problematic when the company seeks investment, negotiates a licensing transaction or prepares for acquisition.

An intellectual property audit should therefore examine more than patent registrations. It should identify material intellectual assets, establish the company's ownership or licensing rights, identify relevant third-party restrictions and assess how each asset contributes to the business model.

The exercise can reveal commercialisation opportunities and vulnerabilities that require attention.

A business may discover that it has not adequately protected commercially valuable know-how through confidentiality arrangements. It may also identify existing intellectual property capable of supporting a new product, licensing opportunity or strategic partnership.

The objective is to understand the company's intellectual assets as a portfolio of commercial resources, not merely a collection of legal documents.

Intellectual property can strengthen negotiations with larger businesses.

A startup may develop valuable technology without the financial resources, manufacturing capabilities, or distribution network needed to bring it to market independently.

An established company may possess those capabilities but lack access to the underlying innovation.

In those circumstances, intellectual property rights can form the basis for commercial negotiations.

A startup might license its technology to a manufacturer, enter into a joint development arrangement, or negotiate a strategic investment with a larger industry participant.

The precise structure can be tailored to the commercial opportunity. Licensing arrangements may distinguish between territories, fields of use, applications or customer markets, allowing the intellectual property owner to preserve rights outside the agreed scope.

These arrangements enable a smaller company to generate revenue without assuming all the costs and operational responsibilities of commercialisation.

However, the negotiating value of intellectual property depends on the strength of the underlying rights and the commercial need for the technology.

A patent does not automatically create leverage merely because it exists. The relevant counterparty must have some commercial reason to obtain access to the protected invention or avoid the consequences of infringing it.

Similarly, a startup's patent may be valuable without giving the company freedom to commercialise its own technology. Earlier patents held by third parties can still create infringement risks, making freedom-to-operate analysis a separate consideration.

Patent protection can also influence investment decisions.

Investors evaluating technology companies often examine the intellectual property that supports their business models.

They may want to understand whether the company owns its core technology, whether relevant patents are granted or pending, and whether the claimed protection covers features that competitors would otherwise seek to reproduce.

They may also consider whether the company has freedom to operate, the geographic coverage of its portfolio and whether material rights are subject to university licences, joint ownership arrangements or other restrictions.

These matters can affect valuation, transaction structure and the risk protections requested by investors.

Nevertheless, a substantial patent portfolio does not necessarily make a startup attractive to investors.

A business may possess technically impressive intellectual property without demonstrating customer demand, commercially viable margins or the ability to execute its business plan.

Conversely, a company with limited registered intellectual property may establish a defensible position through distribution advantages, confidential know-how or superior customer relationships.

The relevant question is not simply how many patents the startup owns, but whether its intellectual property meaningfully supports a competitive advantage capable of generating commercial returns.

How a company presents its intellectual property can shape market perceptions.

Patent protection may also have value in commercial communications.

A legitimate patent-pending designation can indicate that a business has taken steps towards protecting its technology. For some products, this may reinforce perceptions of technical differentiation or encourage potential commercial partners to examine the innovation more closely.

However, patent-pending status does not mean an invention has been examined, found patentable or granted enforceable patent rights. It should not be presented as independent proof that a product is innovative, commercially superior or protected against every competing technology.

Brand protection can be equally important.

The Maxtrax story illustrates how a business may develop intellectual property rights not only in a product's technical features but also in its distinctive market identity. In appropriate circumstances, Australian trade mark law can protect non-traditional signs such as colours and product shapes, although establishing the necessary distinctiveness can be difficult.

The commercial significance is that customers may come to recognise a business through features extending beyond its name or conventional logo.

This recognition can become a key source of competitive advantage, particularly when products are readily identifiable in crowded markets.

Treat intellectual property expenditure as a strategic investment.

For many founders, the difficulty is not appreciating the potential value of intellectual property protection. The challenge is deciding how to pay for that protection when capital is limited and commercial outcomes remain uncertain.

Patent drafting, examination, international filings, renewals and enforcement can create substantial financial commitments.

The initial application cost may be only a small part of the total expenditure over a patent portfolio's life.

Businesses should therefore evaluate prospective intellectual property expenditure alongside other investments, including product development, customer acquisition, hiring and regulatory approvals.

A provisional patent application may buy time to assess an invention's commercial prospects before committing to higher filing costs. However, it must adequately describe the relevant subject matter to support a later priority claim and does not itself confer enforceable patent rights.

International filing mechanisms, including the Patent Cooperation Treaty, may also assist with coordinating applications and deferring certain national filing decisions. They do not create a single worldwide patent or eliminate the eventual costs associated with obtaining protection in individual jurisdictions.

A staged strategy can help founders align intellectual property expenditure with commercial evidence.

For example, an initial filing may be justified to preserve protection options while the business tests customer demand. Subsequent investment in overseas protection may then depend on the results of that testing, anticipated market entry and the availability of capital.

The more important discipline is to identify what the business expects the expenditure to achieve.

A patent should not be pursued merely because an invention is patentable. Pursue it only if the expected commercial benefits justify the associated costs and risks.

Protecting intellectual property is not the same as commercialising it.

Some businesses devote substantial resources to patents without establishing how those patents will generate financial returns.

Others focus almost exclusively on bringing products to market and postpone intellectual property decisions until competitors or prospective investors expose weaknesses in their position.

Both approaches can be problematic.

Intellectual property protection should develop alongside the company's commercial strategy, with each informing the other.

If a company intends to manufacture and sell its own product, it should consider which rights help preserve its competitive position and whether its operations infringe relevant third-party rights.

If it intends to license technology to established manufacturers, it should consider whether the available rights are sufficiently clear, transferable and commercially meaningful to support those transactions.

If the objective is to attract venture capital, the business should examine whether the intellectual property provides an advantage that supports the scale and returns expected by prospective investors.

These are different commercial strategies, and they may justify different approaches to intellectual property protection.

The strongest strategy isn't necessarily the one with the most registrations. It is the one that connects legal rights to an identifiable source of enterprise value.

The real question is what intellectual property enables the business to achieve.

The Maxtrax story begins with an ordinary frustration and a practical attempt to solve it. What transformed that invention into an international commercial opportunity was not simply developing a useful product, but combining product development, commercial execution, branding, and intellectual property decisions.

Patents and other intellectual property rights can support that process by reducing certain risks, strengthening negotiating positions and preserving growth opportunities.

They cannot eliminate competition, guarantee investment or compensate for a weak business model.

For founders, intellectual property protection should therefore begin with three questions: what creates our competitive advantage, which elements of that advantage can competitors lawfully reproduce, and which legal rights would materially improve our commercial position?

The answers should inform decisions about ownership, registration, confidentiality, licensing and international expansion.

Ultimately, the value of intellectual property lies not in the number of rights a business owns, but in the commercial opportunities those rights allow it to pursue, protect and sustain.