Patents Are Strategic Core Assets For Small Contractors Seeking To Scale

“NATIONAL DEFENSE MAGAZINE” By Chris Galfano and Jason Shull 

“When integrated thoughtfully into a broader IP and contracting strategy, patents can help ensure that those who invest in innovation reap its rewards.

They create legal barriers by forcing competitors to either license a technology, design around it or abandon a market opportunity.”

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“Innovation has always been a cornerstone of national security. From advanced radar systems to resilient communications networks and next-generation materials, technological advantage is inseparable from military strength.

Yet many defense contractors, particularly small and medium-sized companies, underestimate or misunderstand one of the most powerful tools available to protect and leverage that innovation: patents.

Patents are not just legal documents. In the defense sector, they are strategic assets that shape competition, influence procurement outcomes, attract investment and protect hard-won technological advantages in an increasingly crowded and fast-moving marketplace. Understanding the basics of patents is therefore not merely a legal exercise, it is a business and national security imperative.

A patent is a form of property that protects products of original human ingenuity. It is one branch of the broader category of intellectual property, which also includes copyrights, trademarks and trade secrets. While all four forms of IP can be important to defense contractors, patents — particularly utility patents — play a unique role in protecting technical innovations.

A utility patent protects an invention that is new and useful and falls into one of four statutory categories: a process — for example, a novel method of encrypting battlefield communications; a machine such as a new type of unmanned vehicle component; a manufacture, or an article made by humans; or a composition of matter including new materials, alloys or chemical formulations.

Utility patents also protect new and useful improvements to existing technologies, which is a critical point for defense innovators who often build incrementally on prior systems rather than starting from scratch. Once granted, a utility patent generally lasts 20 years from its filing date, assuming maintenance fees are paid.

For patents, the “inventor” also matters. An inventor is someone who contributes to the conception of the invention: the mental step of devising the novel idea. Simply reducing the idea to following instructions or performing routine engineering tasks does not make someone an inventor.

This distinction is especially important in defense programs, where large, multidisciplinary teams are common. Incorrectly naming inventors can jeopardize a patent’s validity while failing to include a true inventor can render a patent unenforceable. Careful documentation and early coordination between technical and legal teams are essential.

Only human beings can be inventors under U.S. patent law. While artificial intelligence and machine learning systems are increasingly used in defense and advanced technology programs to assist with modeling, optimization, target recognition, materials discovery and systems design, the law requires that an inventor be a natural person who conceives the inventive idea.

AI tools may support or accelerate innovation, but they cannot be named as inventors because they do not exercise the human judgment and creative conception required under current patent law.

So, what does a patent actually contain? A patent is not just a certificate. It is a technical and legal document with three principal components.

The first is the written description. In exchange for patent protection, the inventor must fully disclose the invention to the public. This disclosure requirement is why patents are sometimes described as a “bargain” with society.

Most patents also include drawings that illustrate the invention. In complex defense technologies — such as systems-of-systems architectures or mechanical assemblies — drawings can be critical for clarity and claim interpretation.

The second and most important part is the “claims,” which define the legal boundaries of the invention. They determine what the patent owner can exclude others from doing. In practice, patents are litigated, licensed and valued almost entirely based on their claims.

Think of the written description and drawings as context, and the claims as property lines.

Once all that is sorted out, the third component emerges: the patent owner’s right to exclude others from making, using, offering for sale, selling within the United States or importing into the United States the patented invention. Critically, a patent does not necessarily grant the right to practice the invention. A company may need licenses to other patents or may be restricted by regulations, export controls or contractual obligations. In other words, the patent right is exclusionary, not affirmative.

In the defense sector, this exclusionary right can be enormously powerful. It allows a company to prevent competitors — including much larger competitors — from copying proprietary technology without permission.

Defense markets are increasingly competitive, with nontraditional contractors, dual-use technologies and commercial entrants challenging established players. Patents create legal barriers to entry by forcing competitors to either license the technology, design around it or abandon the market opportunity.

Design-arounds are not always trivial. Well-drafted patent claims can force competitors into inferior or more expensive solutions — an advantage that can be decisive in procurements.

Patents can also materially influence negotiations with the Defense Department and other agencies. They can strengthen a contractor’s position in sole-source justifications; support valuation in mergers and acquisitions or investment discussions; provide leverage in data rights negotiations; and demonstrate technological differentiation in competitive procurements.

Patents are often scrutinized during due diligence, particularly in transactions involving classified or sensitive technologies.

A robust patent portfolio signals that a company is serious about innovation. This can attract top engineering talent and encourage internal research and development by assuring teams that their work will be protected and valued.

Meanwhile, investors and acquirers routinely evaluate patent portfolios when assessing a company’s worth. Even early-stage companies with limited revenue can command higher valuations if they control strategically important patented technologies.

A common misconception is that working with the government means surrendering intellectual property rights. This is not true. While government contracts often include provisions governing data rights and march-in rights, contractors can — and frequently do — retain ownership of their patents. Ownership typically starts with the inventors but is usually assigned to the company under employment or contractor agreements.

With proper planning, contractors can protect proprietary technologies while still complying with government requirements. A well-crafted IP strategy is especially important for small defense contractors seeking to scale.

Meanwhile, Congress in 2011 enacted the America Invents Act, which fundamentally changed U.S. patent law. The United States moved from a “first-to-invent” system to a “first-to-file” system. Under the act, patent rights generally belong to the first inventor to file a patent application — not the first to conceive the idea. This shift places a premium on speed and strategy. In practical terms, delays in filing can be fatal, particularly in collaborative defense environments where disclosures, demonstrations or field testing may occur early.

One common protective tool is the provisional patent application, which establishes an early filing date, requires less formality than a full application and provides 12 months to file a non-provisional application claiming priority to it. However, a provisional application is not examined and never becomes a patent on its own. If a non-provisional application is not filed within one year, the benefit of the provisional filing date is lost.

For defense contractors, provisional filings can be particularly useful when technologies are evolving or when funding and program milestones are uncertain.

After filing a non-provisional application, the U.S. Patent and Trademark Office assigns it to an examiner with relevant technical expertise. The examiner reviews the application to determine whether the claimed invention is new and non-obvious over prior art.

Most applications receive at least one rejection. This is normal. The applicant and examiner then engage in a back-and-forth process to refine the claims and address legal issues. If successful, the result is an issued patent with enforceable claims.

Finally, public disclosure of the invention before filing a patent application can destroy patent rights, particularly outside the United States. Defense contractors must be especially careful when demonstrating technology to government customers; participating in industry days; publishing technical papers; or collaborating with partners.

Non-disclosure agreements are an important tool for protecting sensitive technical information, particularly in the defense sector where collaboration with government agencies, prime contractors and subcontractors is routine. The agreements can help preserve confidentiality, limit downstream disclosure and establish contractual remedies if information is misused. However, they are not a substitute for timely patent filings, and relying on them alone can create a false sense of security.

In the modern defense landscape, technological advantage is fleeting unless protected. Patents provide a powerful, legally enforceable means of safeguarding innovation, shaping competition and strengthening business outcomes.

For defense contractors large and small, patents should be viewed not as abstract legal instruments, but as core strategic assets. When integrated thoughtfully into a broader IP and contracting strategy, patents can help ensure that those who invest in innovation reap its rewards while supporting the broader mission of national defense.

Understanding the basics is the first step. Acting on them is what makes the difference.”

What to Know About Patents

Chris Galfano and Jason Shull are intellectual property law attorneys at the law firm Banner Witcoff, Ltd.