Know your portfolio

22-04-2017

Martin Bijman

Know your portfolio

wundervisuals / iStock Photo

Proving patent value can be achieved with a diverse team of subject matter experts and analysts trained to use tools with data and methodologies, as Martin Bijman of TechInsights explains.

Every patent owner wishes to prove the value of its patents. The most immediate proof of value is when licences are negotiated, patents are sold, or your portfolio has been leveraged as an important asset. In lieu of that, rating the potential value of patents is subjective, the sum of many factors and observations. The best practice of portfolio owners is to know what they’ve got, determine where to take their portfolio, and how to use it.

What’s in your portfolio?

To gain an understanding of your portfolio, you can count your assets, conduct analytics of some key factors, and engage a variety of subject matter experts to evaluate your portfolio.

Portfolio assets can include patents, existing licences, claim charts that are ready to use, and an effective team invested in the assets. Looking solely at the patents, a baseline would be to count the number of patents in each jurisdiction where your products are sold and where your competitors have operations. In addition, count how many applications are in play and how many granted patents have continuations underway.

Securing indications of portfolio value may involve analytics. The key to effective analytics is to validate that a parameter correlates to demonstrated real world success. There are many patent tools available which report on a long list of parameters. Practically, it is up to portfolio owners to determine which parameters are correlated to value and what methods to follow with these tools to determine indications of value.

Let’s consider how patent age and forward citations might reflect patent value. The validation dataset would be TechInsights’ long history of creating evidence of use. The average age when evidence of use is produced is a bell curve centred at ten years. This suggests the average revenue stream of a patent comes in the second half of its lifetime.

Some patents, however, may be of higher value if they target technologies that are adopted in the market early in the patent lifetime, as they may generate more licensing revenue. Such recent technologies include LEDs, mobile phone control panels, and integrated circuit stacking, layout and architecture. Forward citations, and preferably non-self-citing forward citations, have been found to be higher for patents that have documented evidence of use (Figure 1).

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Early patents

Consider finding foundational patents in a portfolio. Foundational patents are innovations that create new technologies and enable differentiating features that motivate customers to buy these products. How can you identify these patents? One effective way is to analyse a portfolio together with other similar portfolios and observe technology clusters of similar patents spread throughout the dataset. The earliest patents in these clusters are potentially foundational patents.

For analytic purposes, you can score all the early patents by their priority sequence in each cluster. How are the clusters created? International patent classifications could be used, but it is more effective to use semantic clustering of the concepts in the patents so that the patents speak for themselves.

Subject matter experts

A stronger assessment of portfolio value requires subject matter experts to read the patents. A range of expertise is needed to do this well. This includes experience in patent validity, technology, and economic value. Considering technology, even a modest portfolio will have a wide diversity of technologies, thus requiring an equally diverse group of experienced patent analysts.

 "It is becoming more common for companies to pursue indication of use for their applications of claims that are not yet allowed"

Four commonly pursued aspects evaluated by subject matter experts include provable use, workaround, economic value, and validity. Patent use, and the ability to prove it, is probably the most compelling attribute to generating patent value. There are other motivations that go beyond the value of individual patents, such as filling white space, consolidating patents into a pool, and improving a company’s innovative reputation.

The value of the evidence of use is determined by the other factors. If a company can work around a patent and still deliver the desired feature, the patent value drops. Similarly the patent value depends on how much the innovation incrementally increases the price of a final product, and whether the patent is found to be valid in court.

These aspects of patents in a portfolio have been challenging to model with analytics. Some aspects are promising, such as the ability to prove use, in that some crowded technology areas of art are consistently hard to detect. Using this and other techniques, some portions of a portfolio could be read less deeply in an assessment. The best way to determine the potential value of patents and to prepare for diverse monetisation is to get the right team of subject matter experts to evaluate your portfolio.

 Where to take your portfolio

A portfolio will change and adapt over time. It will depend on the product roadmap of the company, research and development, corporate acquisitions, portfolio maintenance, revenue goals for the portfolio, and the global market for certain types of patents.

Portfolio managers should have an ongoing plan to improve their portfolios. This plan would include a licensing schedule regarding companies of interest, defensive preparation for companies that are expected to serve notice, leveraging the portfolio regarding new hot technologies as well has high revenue markets, and periodic maintenance to keep portfolio costs balanced.

Companies regularly harvest inventions from their research and development. This may be encouraged through innovation disclosure incentives, and by interviewing design groups about a recent product development before the product is disclosed to the public.

Depending on the results of portfolio analytics or assessment, white space and crowded space in the portfolio may become apparent. This may allow the management to be more selective about what innovations to pursue in crowded art and to offer greater incentives for innovation disclosures in white space of their organisation.

Another opportunity is to strengthen your applications. Patent prosecution activities in many companies are often done in isolation from portfolio monetisation. It is becoming more common for companies to pursue indication of use for their applications of claims that are not yet allowed. This enables a number of opportunities, in that the prosecution team can pay special attention to certain patent applications that have indication of use, that the claim might be adjusted to improve the indication of use, and that when the patent is granted it can be immediately asserted.

Another opportunity to strengthen applications is to ensure that continuations are pursued for applications with important unclaimed additional inventions in their disclosures. This can be investigated at any time in the prosecution timeline, before the current claim is allowed, and after an allowance.

Maintenance of a portfolio is an important activity to manage costs. At each maintenance period, the likelihood of use of a patent is assessed. Typically, the likelihood of evidence of use drops as a patent gets older, so it is prudent to spend more time considering whether to maintain a patent later in its lifetime.

Companies may also acquire patents when they wish to improve their position in a technology, or to respond to an assertion. There is a steady stream of portfolios on the market, which can be assessed for gems. Alternatively, companies may proactively try to identify and acquire patents in a particular area of technology.

 How to use a portfolio

It is when a company is preparing for a negotiation that it proves its patent value. Using and monetising your portfolio gives a company additional revenue and helps to reduce licensing cost.

There are many reasons for preparing an assertion, for example, pursuing licensing, cross-licensing, preparing for an upcoming licence renewal, or a defensive preparation regarding an anticipated notice from a company or competitor. By completing a deep portfolio assessment, you would get to know your portfolio very well, enabling you to reuse the knowledge and insights that are gained to prepare for these many goals.

When responding to being put on notice, the timeline is set by the asserter or the court. As a result it is necessary to find evidence of use quickly that is proportional in value to the notice. In these situations the use of portfolio analytics is highly effective in accelerating the preparations, with consideration that the analysis is targeted and the opportunity for reuse of the result is diminished. Finally, evidence can be found in a technology analysis database such as TechInsights’ Inside Technology.

Proving patent value is a necessary activity for a portfolio owner in many situations. It can be achieved with a diverse team of experienced subject matter experts and analysts trained to use tools with data and methodologies that are validated to reflect real world success.

Martin Bijman is director, intellectual property products at TechInsights, where he is responsible for ensuring customers find and receive the highest value products and services to help achieve their IP goals. Bijman previously worked at Chipworks for more than ten years. He can be contacted at: mbijman@techinsights.com

Martin Bijman, TechInsights, patent, patent portfolio, LEDs, licence, licensing cost, licensing, analysis,

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