BRIGHTON, England – Automakers are facing tough legal decisions as they increasingly move toward adopting green technologies: do they patent their inventions or deliberately leave them unprotected, encouraging other companies to improve their design?

Experts tell WardsAuto there is no one-size-fits-all solution, given the variety of innovations now under consideration.

Patents expert Efrat Kasznik, president and founder of California-based Foresight Valuation Group, says the auto sector currently is focused on defensive patenting, even for innovations it does not use.

“In R&D-intensive industries, such as the auto industry, the patent yield is highly correlated with the R&D budget as it is perceived to be a direct return on innovation,” she says.

“Auto companies are traditionally very large patent holders, and a lot of the innovation in the auto industry is driven by regulations. Oftentimes, an auto company will try several possible solutions to achieve an emissions standard that is coming up 10 years from now, and only adopt a small section of the solutions, leaving several of the other solutions unimplemented.

“Having said that, many of these solutions will still be patented, leading to large patent portfolios covering innovations that are not necessarily present in products.”

Patents, Kasznik explains, have two types of value: enforcement, or “stick,” value; and technology transfer, or “carrot,” value. Enforcement value is associated with the right to enforce the patent. Factors such as age, patent classification, patent family, length of claim and filing history with the patent office influence this value.

Technology-transfer value is associated with newer patents that will be applicable to future products in emerging markets. This type of patent is monetized through the holder’s own products or by licensing to others who wish to bring new products to market.

“Here, what is really important is the path to market as this patent gains value from future products,” Kasznik says. “Also important is the existence of know-how and other technology, in addition to the patent, since a patent alone is not enough to build a product.

“All the patent provides is the right to exclude others, so it gives the holder a limited monopoly and the ability to gain some early market share.”

Fernando Torres, chief economist at IPmetrics, tells WardsAuto: “Since patents are ‘exclusionary rights’, they are valuable to a company if they allow companies to exclude others from using the innovation.”