IP monetisation: know your value

In C-suites and boardrooms around the world, capturing the value of patent portfolios is more than just a topic—it has become a mission. As the remaining life of these intangible assets drops away year by year and maintenance fees to keep them alive mount up, the enterprise comes to the point that decisions have to be made.

How can the enterprise capture the value of the portfolio? What is the portfolio actually worth? What would be an acceptable price for various assets in the portfolio?

These terse questions can sometimes generate very long answers, depending on the sophistication of your company’s IP operations and the breadth of the portfolio. Clearly, answering the simple question ‘what do we have in the portfolio?’ has many levels to it based on how the portfolio was assembled and the status of the patents within it.

Patents could have been developed and prosecuted internally, acquired along with various corporate acquisitions and mergers, or just acquired as part of IP transactions with others. As in an old-growth forest, if you take a random picture in any direction you will see trees at every stage of life: from small sprigs through to giants, through to rotting deadfall on the forest floor. The same is true of a mature patent portfolio, with provisional applications, pending published applications, granted patents, reissued patents, lapsed patents, reinstated patents, foreign counterparts, and so on.

Diversity of origin and prosecution status push the question of portfolio content and value, and this question needs to be answered before any rational monetisation plan can be built. One wants to know:

a) What patent assets are core to the business and need to be kept for freedom to operate and competitive protection reasons?

b) What patents are non-core to the business but are worth keeping (at some level) for defensive purposes because they read on specific technologies and products manufactured by competitors?

c) What patents are non-core to the business but have Evidence of Use (EoU) and could be valuable components of a licensing or divestment programme?

d) What patents have no EoU today and never will have in their lifetime and thus should be taken off maintenance and allowed to lapse?

Portfolio review

The only way forward on such questions is to review the portfolio in a systematic way so the details of the patent assets and what they read on can be captured and logged into an effective portfolio tracking system.

Typically, an automated sort is done using Cooperative Patent Classification or US Patent Classification sub-class codes to determine the areas covered and the expertise that will be needed to assess the patents.

Following this, subject matter experts are retained to:

1) Build a taxonomy for categorising the patents in a manner that maps well to the direction of the business;

2) Review and code the patents according to this taxonomy, further partitioning the portfolio into technology and application areas; and

3) Assign a licensing value grade to the patents based on the use of each patented invention in industry and the ease with which one can detect such use.

Judicious decisions can be now made about which patents to keep on maintenance and which to drop, which to retain and which to divest. The updated tracking system allows for such decisions based on what the patent claims actually read on.

Corporate management can now design the portfolio monetisation programme. Key points for consideration include:

1) If it launches a licensing campaign, the operating enterprise can expect countersuits coming back from those entities asserted against. Does the enterprise have an appetite for such litigation, or would it just be easier to sell the patents?

2) Does the enterprise care if its patent assets are sold to non-practising patent assertion firms that are focused on generating a financial return through licensing the patents they acquire?

3) Is the enterprise willing to accept a back-end share of future royalties if those royalties are established through a third party licensing programme that involves litigation?

There are nuances to putting an effective programme together. Knowing what you have well before ‘price’ enters the discussion is the most reasonable first step to capturing portfolio value through monetisation efforts.

Art Monk is vice president, patent brokerage, at TechInsights. He can be contacted at: amonk@techinsights.com