Is it better to invest in companies that make stuff – or in companies that own intellectual property vital to the companies that make stuff?

Investors are becoming increasingly aware of the advantages of being an “arms dealer” in patent wars.

Companies on the “front lines” – in smartphones, for example, companies such as Apple, Samsung, Google – have to invest huge amounts of money in factories and marketing, and they have to fight battles over the intellectual property they use. Sales can be lost because of changes in consumer preferences. Injunctions from owners of IP can block shipments of products. And there are the huge legal fees and occasional massive judgments: a court ordered Samsung to pay Apple over a billion dollars in their patent battle. It’s a messy business.

A couple of companies that are thought of as “has-beens” in the smartphone sector are finding new life as providers of vital intellectual property. Nokia’s stock plummeted 74%, from a high of $6.33 to a low of $1.63 in the last year. Its stock has recaptured some ground as it has repositioned itself as a provider of intellectual property to companies such as Apple. Nokia is already collecting over half a billion dollars a year in licensing fees for patents in its portfolio, and they have been making moves to step up their patent monetization activity. According to one estimate, patents now account for $7.5 billion of Nokia’s $9.6 billion market capitalization.

Research in Motion (RIM) has seen sales (and stock price) plummet as users abandon their Blackberry products in favor of the iPhone and Android-based smartphones. Similar to Nokia, however, RIM has some valuable technology, and may be able to make some lemonade out of lemons by licensing their technology.

Some companies, such as Rambus, invest heavily in developing technology without planning to ever manufacture products themselves – their entire business model is based on developing and licensing intellectual property.

All of this highlights the value of patents, the basic currency in the intellectual property marketplace. As the investment community becomes increasingly aware of the role of patents in the commercial success of technology companies, the value and importance of patents will only increase.