Aristotle’s quote: “the whole is greater than the sum of its parts” aptly sums up the value of designing and managing an effective patent portfolio. In truth, the circumspect businessperson understands that the true value of patents rest not in their individual worth, but rather in their accumulation into an optimal patent portfolio that seeks to maximise value for the company vis-à-vis its overall R&D, business and market strategies.
With the irrefutable importance of deriving value via intellectual property (“IP”) assets, it follows that the increase in infringement risks and the need to protect your market should be primary concerns for the company. Be it to erect barriers against competitors (eg. decisions to enforce or defend your patent rights) or to derive revenue from the patents (eg. via cross-licensing with third parties), or to increase funds (eg. through government funding), the consequent impetus to strategically increase your business value via the design and management of a strong patent portfolio is imperative.
The Formulae for an Effective Patent Portfolio?
The crux in an effective patent portfolio is really in the continuous process of audit, which should be tasked to the patent portfolio manager with the required legal expertise. This is especially so in cases which bring forth different considerations pertinent to the company’s overall game plan – eg. M&As, joint ventures, IPOs, new inventions, new product launches and licensing activities – the importance of the ongoing audit process cannot be emphasised more. Ultimately, an effective patent portfolio must be synergised with the company’s overall game plan, which includes its business strategy, market strategy, R&D strategy, and technological intelligence – it cannot be a standalone isle.
Together with the R&D and business management managers, the patent portfolio manager has to instil a system which sets into motion three main – and frequently overlapping – segments of the audit process:
1. Capturing the value of your invention
Foremost, the astute patent portfolio manager understands that the optimal method of capturing the value of your invention may not always be in patenting. Alternatives such as contracts, protection under the law of confidential information or even blatant disclosure of the invention, may better serve your purpose.
Assess your processes and procedures
In considering the company’s overarching commercial objectives before deciding which inventions to seek patent applications for at the end of the day, the relationships between patent and corporate management have to be ascertained clearly. The patent strategy to be established, implemented and supported by the company must be tailored to the company’s overall business and marketing strategies, as well as technology intelligence. These are, in turn, dependent entirely on the nature of the company’s products and services, where its existing and potential markets are located, and the nature of those markets. Some pertinent questions, such as: where the company’s current position; where it wants to be; how it wants to get there; what part does innovation play in getting it there, and how it can leverage on its innovations – have to be answered.
Know your competitors and your market – potential disputes, alternative solutions and gap-filling?
It is pivotal to identify and monitor your competitors and potential competitors on the intellectual property frontier. Tracking the current product developments, patenting, litigation, licensing and other commercialisation activities of your competitors would preempt potential obstacles in your commercialisation activities vis-à-vis your patent portfolio strategy – you would be better placed to strategise your next move in either defending or attacking a particular patent in question when a dispute arises.
For instance, as a defensive move, you would also be better positioned to design around the patent product; or as an offensive move, anticipate and file patents on the products that competitors might develop in the future. Additionally, in keeping abreast of the competition, potential gaps in your company’s patent position may be identified and filled before potential litigation comes knocking at your office door.
By knowing the competition and the market, the patent portfolio manager’s answers to the vital questions of “what to patent”, “where to file”, “what are the potential risks and disputes even if I have the patent” and “what are the alternatives to patenting”, would be made so much clearer.
2.Filing patents – some strategies
Minimise your costs
Assuming you have patentable inventions on hand and you have decided to take the plunge in getting them patented, the million-dollar question then resides in minimising the costs involved. Some pertinent tricks of the trade – assuming you intend to seek patent applications in more than one country – include tapping into the various Patent Prosecution Highway (“PPH”) and Patent Co-operation Treaty (“PCT”) initiatives, where applicable. These arrangements would significantly expedite the patent application in several countries simultaneously – which effectively translate into savings, both in terms of time and money.
Organise your inventory
Organisation is key – for practicality’s sake, a company should never attempt to patent every invention on hand. Aside from having a spreadsheet that collates the essential information of the inventions – including the title of the invention, summary, filing date, inventor and application status – it is also helpful to categorise the inventions into different technical areas and develop a ranking system to ascertain the degree of alignment of the particular invention to your overall business strategy and the current market trends. Such information would also allow further ease in ascertaining whether to monetise your patents and whether to abandon a particular patent or patent application at any point in time.
Generating revenue via your patent portfolio
Exploiting your patent portfolio may be a pivotal part of your company’s overall business strategy. By regularly reviewing your patent portfolio to seek out non-core patents that may be assigned or licensed to other entities, you optimise the propensity in which revenue can be generated via your patent portfolio. The examples of IBM and Qualcomm are cases in point. In IBM’s case, the corporation’s revenue from licensing its patented technologies increased from US$30 million in 1990 to US$2 billion in 2002. In Qualcomm’s case, licensing and royalties fees account for more than 20% of its total revenue, whilst projected earnings from the same amounted to an astounding US$475 billion in 2009. As such, it is certainly evident that an astute patent portfolio manager should not neglect the potential for the monetisation of his patent portfolio.
Further, unloading outdated patents in response to market changes is also a surefire way of cost minimisation. Corporations should constantly be asking themselves whether there is still a market for the patent, and/or whether it is necessary to renew the patent. As mentioned above, patents that are no longer aligned with the company’s overall business strategy should be assigned or licensed out if they can be of value to other entities. Alternatively, for potential tax incentives, they can be donated to other entities. In the interest of improving your company’s bottom line, patents should be abandoned as well if the costs in keeping them outweigh the benefits. As with any investment, the cost-benefit analysis for maintaining a patent should always be kept in check.
In a Nutshell
To increase the strategic business value via patents, the crux is in the design and management of the overall patent portfolio. A prudent patent portfolio strategy – which aligns the filing of selective patent applications and the maintenance of patents to the overall company’s game plan – maximizes the returns from the patent portfolio for the company. Unfortunately, there is no “one size fits all” formulae where an effective patent portfolio is concerned. Because of different industries and marketplace forces, what holds true for a particular business segment may not be true for another. For instance, in any part of the decision-making process, patent portfolio managers in MNCs with deeper pockets and greater economies of scale, would typically have different points of concern from their counterparts in SMEs with less well-lined pockets and higher likelihood of cashflow issues.
As such, the ultimate decision for an effective patent portfolio is really a commercial one – in weighing the costs of patenting versus the potential returns via the investment, the stakeholder has a tremendous task in ensuring that the eventual objectives of the patent portfolio strategy are in sync with the company’s overall R&D, business and market strategies. Towards this end, in order to reap the true value of his patents, a prudent businessperson should be quick to seek out professional assistance, which includes legal counsel and accountants. In having the experts negotiate and formulate watertight licensing agreements, as well as to work out the palatable licensing fees and royalty sums, the IP owners’ fair rewards for their investments may be derived.
After all, at the end of the day, it’s the dollars and cents that truly matter.