Capturing and exploiting patent value
Published on 8th Jul 2015
Summary – top 5 tips
Working out how to get the best return on patents is an art rather than a science, and no one approach will apply in all cases.
Our Round Table discussion at our patent seminar on 30 June, reported here, identified some key points for assessing what factors to look at.
1. “Patents plus”
A portfolio of patents, even in isolation from the know-how and vision of the business which developed the technology, may be enormously valuable to close competitors working on substitutable products – as in the mobile phone patent wars. But unless the potential buyer or licensee is already engaged in the same market, patents on their own may have little apparent value or interest to the outside world. Decisions as to what to patent go hand in hand with a business objective – a new product, a different cost structure – and without understanding this objective (and its feasibility) patents may not add real value at all. In order to extract value, a buyer or licensee is likely to need access to the right know-how and markets.
On the other hand know-how alone, whilst certainly valuable as a platform for developing future technology and smoothly implementing the present, is impossible to capture absolutely and therefore vulnerable to being dissipated over time as employees depart.
2. What is the source of value?
A patent may add value by maintaining exclusivity over product edge, and thus market share and profit margin. It may allow access into a market – for research collaboration, for instance – that would otherwise not be feasible due to the risk of leakage of too-widely-shared confidential information. It also enables more open internal communications within a company, which might otherwise have to operate under the organisational constraints of trade secrecy in order to protect its work. At the most superficial, but still effective , level, it can be invoked in marketing, to persuade customers of the product’s innovative and desirable status.
If it is not protecting technology which is core to a company’s own products, it may be exploited as a source of licensing revenue. The connection between patents and products may enable tax benefits to be claimed, and the use of patents by other group companies should be considered in setting the inter-company transfer price.
The calculation is very different in each case. And more than one may apply to one and the same patent.
3. Look at the history
A granted patent is not necessarily a valid patent: patent offices do a good job but are far from perfect. The fact of grant is therefore only a partial endorsement of the patent’s strength. A patent which has been opposed (in the European Patent Office) or subjected to an inter partes review (in the US Patent and Trademark Office), on the other hand, has been subject to a more rigorous analysis and has a higher chance of withstanding any later challenge. Further, by having been singled out for attempted removal, the patent’s likely commercial relevance and value have been established.
4. Is the market there?
Some great inventions have failed commercially: the superior Betamax video technology was out-marketed by the VHS; the zip fastener patent expired before the market for easy closure clothing (World War II air force uniforms) came into existence. It is also important to identify which market(s) are relevant. A history of successful innovation, demonstrated with a portfolio of patents, may open access to future research collaborations taking a company into different markets, which may not otherwise have been considered accessible.
5. Think laterally
Kodak’s failure to shift its business from film to digital cameras in time to catch the wave of mobile devices incorporating cameras left it holding a thousand patents it was unable to exploit to their full value. Even the strongest patent may be rendered worthless if technology adopted in the marketplace moves into another direction. In terms of patent value, this cuts both ways: patents a company holds today may not look very promising, but there could be other markets in which they would hold a truly strategic position. Conversely, as in all things, success is fragile and a portfolio must constantly be re-assessed for its current but also future importance, so that research efforts can be focussed towards tomorrow’s business needs. Only if there is no realistic prospect of the patent finding its niche either today or tomorrow should abandoning it be seriously considered.
