How can companies create value and maintain (or increase) market share in a way that will last beyond our current epidemiological crisis? What assets and strategies should be prioritized to put companies in the best position to survive the ongoing COVID-19 virus, as well as to thrive when the quarantines pass? This is the landscape CEOs around the world are wrestling with. Instead of focusing entirely on conventional assets in order to ride out the recession, executives should also look at an alternative cash reinvestment option: identifying, developing, and protecting their employees' innovations.

Americans may (temporarily) be putting less gas in their cars and less miles on their travel cards, they still need to eat, shop and apparently buy toilet paper. In fact, American consumers are shopping so much, and shopping online, that Amazon is attempting to hire 100,000 more warehouse employees.

Herein lies the rub. Amazon, the monolithic online retailer, is also a company that is notorious for reinvesting back into their business: Amazon rarely performs buybacks, and has never issued a dividend. Amazon has used their cash to innovate and tap into a breadth of markets, and succeeds in spite of one or more streams of revenue temporarily drying up. The airline industry on the other hand spent 96% of free cash flow on share buybacks over the last decade. Now they are in a precarious position, and require substantial government bailouts on unfavorable terms. Businesses like Amazon that invest in innovation are more likely to survive this pandemic.

In a demand glut caused by quarantine, conventional sales paradigms are turned on their head. An established company producing close to 100% of a certain good may profit by virtue of their market share itself: If Brand X is the only name in widgets, why would anyone shop anywhere else? However, if Brand X's widget factories are all producing at 50% efficiency due to a quarantine, buyers in the market will start looking at secondary producers. If these secondary producers are able to meet this unsatisfied demand, they may permanently capture some or all of this unmet need—after the quarantines end, many consumers may not switch back to their old standby, Brand X. Thus, a company that once controlled almost 100% of a given market could end up with 50% of that market: current market dominance does not ensure continued success when demand goes unfulfilled.

Innovation, and the protection of that innovation through the development of intellectual property is a clear pathway to adding investor value and preserving market share. Innovation does not need to occur on a specific floor of a specific building with specific people at a specific time: talented experts are working in their homes, continuing to develop their ideas. Even if their ideas cannot currently put into practice, these ideas are nevertheless still assets to employers.

Companies must act decisively to identify and protect these innovations to maximize investor value and market share. If the time to market for the new invention, post-quarantine, is over a year from now, that leaves better-situated competitors substantial time to develop the same idea and bring it to life. For example, to further their investments in innovation, Amazon had 2,427 patents granted in 2019.

However, smaller companies should not look at that number of patent grants and give up hope. Zoom Video Communications has less than 1% of the employees Amazon does, and yet they too have seen their share price grow 162% as compared to the S&P 500. Obviously Zoom has the remote communication applications people need during a quarantine, but their relatively small patent portfolio (including U.S. Patent No. 10,609,390, issued March 31, which relates to adaptive screen encoding control) has likely helped in keeping far larger competing corporations at bay—and every day that users become more accustomed to using Zoom video conferencing, the less likely they will switch to another player in the market.

Patents provide the holder with lasting value. Patent are a right to exclude other competitors from making, using, selling, offering to sell, or importing an apparatus or device, or performing a method or process. Patents, and the associated right to exclude competitors, actually increase in value during demand gluts: Brand X controlling almost 100% of a market has less need to exclude competitors than Brand X controlling 50% of that market. By patenting their innovations, companies can secure their market share, and protect against market share erosion by smaller, leaner competitors. The ability to secure market share indicates the patent-holding company is a safe haven for revenue in a time of great instability, and therefore patents make the company more attractive to investors. Successful innovators understand the value of patenting during volatile markets, and are already acting quickly to secure intellectual property counsel:  the demand for patent attorneys has risen 40% within the larger legal hiring market during March.

Once granted by a competent issuing authority (e.g., the U.S. Patent and Trademark Office) patents exist as an asset, and only through substantial effort and expense can this value be challenged and taken away. This "cost of defense" is part of the leverage of nonpracticing entities or "patent trolls" in lawsuits brought against massive corporations.

This means that, should a company not thrive during the quarantine, they still hold patent assets that may not depreciate: A factory full of workers is much more valuable than an empty factory, but a patent is valuable whether the patent holder is rich or poor. The retained value of patents in the face of poor company performance or even bankruptcy allows investors to feel safer buying shares of the patent-holding company: the underlying patents as assets will retain their value, and thereby buoy the company's value to the shareholders.

The market now is in an especially tumultuous place, with investors and executives looking to extract, display, and secure value.  Securing intellectual property, and in particular filing patents, allows all these parties to efficiently put assets on their books that are already inside their doors.

Willem Klein is a scientific adviser at RatnerPrestia in the firm's Washington, D.C. office where he uses his skills to help develop intellectual property solutions for clients that take into account both their scientific and their business needs.