The third of the five moat pillars covers the advantages you can't photograph: brands that command premium prices, patents that legally exclude competitors, and licenses or approvals that keep the field of rivals permanently small. Intangible assets are the oldest moat source in the book — some brand moats predate the automobile — and also one of the easiest to misjudge.

Brands: the pricing power test

The single most important idea in brand analysis: a brand is only a moat if it confers pricing power. Fame is not the test. Plenty of universally recognized brands cannot charge a cent more than their generic competitors — their brand is a marketing asset, not a moat.

The brands that are moats do one of two things:

  • Command a price premium for a functionally similar product. Consumers pay multiples of production cost for luxury goods, premium spirits, or an iPhone (AAPL) — because the brand itself delivers status, trust, or identity that a copy cannot.
  • Reduce search and decision costs. For everyday purchases, a trusted brand is a shortcut — the certainty that this cola tastes the way it always has. Coca-Cola (KO) has run on that certainty for more than a century.

The evidence to look for is quantitative: gross margins persistently above peers, price increases that outpace inflation without volume loss, and market share stability through recessions (when consumers are most tempted to trade down).

Patents: monopolies with expiration dates

Patents are the most literal moat — a legal right to exclude competitors. Pharmaceutical companies are the extreme case: a patented drug can earn monopoly economics for a decade or more, which is why a single successful molecule can fund a company.

But patents differ from brands in one crucial way: they expire on a published schedule. The "patent cliff" — the revenue collapse when generics arrive — is one of the most predictable events in investing. Judging a patent moat means judging the portfolio and the pipeline, not any single patent: How concentrated is revenue in patents expiring soon? Does the R&D engine reliably replace what rolls off? A deep, refreshing patent estate is a durable moat; a single aging blockbuster is a countdown timer.

Licenses and regulatory approvals: the moats governments build

The third intangible is permission itself. Banking charters, aerospace certifications, casino concessions, credit-rating accreditations, utility franchises — wherever operating legally requires an approval that is slow, expensive, or politically difficult to obtain, incumbents are protected by the state.

Regulatory moats have a distinctive character: they often cap growth (regulators giveth and regulators capeth) but produce extraordinary stability, because the moat doesn't depend on out-executing anyone. The risk is equally distinctive — a single rule change can redraw the moat overnight, which is why regulatory-moat companies demand attention to the political weather.

How intangible moats age

Each intangible ages differently, and the difference matters for the wide-versus-narrow rating:

  • Great brands can compound for a century — but they can also be eroded by a generation of consumers with different values, or by channel shifts that weaken shelf-space advantages.
  • Patents decay on schedule — durability is entirely about the pipeline.
  • Licenses last until the law changes — stable for decades, fragile in a crisis.

And the AI era adds a new question: when recommendation engines and AI agents make more purchase decisions, do trust-shortcut brands matter more (a trusted name in a sea of AI-generated options) or less (the agent optimizes on specs and price)? The answer will differ by category — and it's exactly the kind of question a moat analysis should address head-on.

How MoatScan scores it

MoatScan's AI scores the intangible assets pillar from 0 to 10, testing whether the intangibles convert into economics: sustained premium pricing, margin advantages over peers, patent-cliff exposure, and the strength of regulatory barriers. Browse every company in the database scoring 7 or higher on the stocks with strong intangible assets list.

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