Making the most out of it: getting value from your patents

Patent assertion is a hot topic. Whether it’s US President Barack Obama announcing new measures against so-called ‘patent trolls’, non-practising entities (NPEs) litigating against industry players, or technology companies exploiting otherwise unused patents through licensing negotiations, it’s clear that patents are more highly-valued than ever before.

Despite that, however, many companies are still sitting on large numbers of patents that cost money rather than make it. With maintenance fees and the time required to manage these patents, what could be valuable assets can actually end up being a drain on a company’s resources.

Many companies have been dealing with this issue by researching their portfolios, divesting those patents they don’t need and asserting those that could provide extra value. While this process can be conducted in-house, many companies may not have the time to take on such a huge project so they seek outside support to conduct this activity.

Mike McLean is a leading IP strategist and the senior vice president of professional services at TechInsights. TechInsights helps companies maximise the value of their patents by researching their portfolios, understanding cross-market applicability and advising on development, assertion and divestment strategies. Representing clients including 25 of the top 50 US patent holders, the company has a long history of helping companies maximise the value of their assets.

“We see the technologies that are actually being used. In-house experts will know what their own company is doing,” McLean says. “Someone from academia will know the theory. We see the nuts and bolts of what’s actually being implemented in the broader marketplace and across industries through our analysis and reverse-engineering activity.

That insight in terms of comparing patent and technology to specific claims allows us to identify conclusively the patents that have value.

“With our experience, by taking just a few basic steps, companies can greatly improve the value of their patent portfolios.

“The first step is to have structure in your patent portfolio. We see far too many companies where their patents are just an aggregate mess. They have very little insight into what’s there,” he says. “They may understand a small number of their golden assets, but across their broader portfolio they’re unable to bring the insight to bear and use the asset to benefit the company.”

There are a number of ways to organise your patent portfolio, McLean says. “The key is to create a custom taxonomy that’s relevant to a given company and its industry. Starting with automated tools often doesn’t work because they start from a pre-determined taxonomy that may not be relevant to the business and may not point out what is missing. We’re big advocates of human intelligence in creating the taxonomy and then using automated tools to populate that taxonomy after the fact.”

For TechInsights, “building structure means organising the portfolio, and sorting it in groups around technology, products or markets is essential”.

“The next step is to evaluate the assets within those groups. So, for example, you may discover that in group X you have five assets that are strong, 10 that are average and 20 that are weaker. You can then use this information to identify how to realise the most value from different parts of your portfolio, what parts of your portfolio require additional development, and if your overall patent strategy needs to be better aligned with your business objectives.”

McLean estimates that vast numbers of patents are currently under-utilised in most technology industries, but it’s one thing to know that your patent portfolio is under-exploited and quite another to manage and leverage it effectively.

Some companies will want the portfolio assessment to be a collaborative process, where in-house teams work with the external consultants to build up the most accurate picture of the market and their position in it, but others will out-source the entire process. Whichever way they choose to do it, companies find it to be a good investment.

McLean explains: “One company in particular that we work with, is generating hundreds of millions of dollars in licensing revenue—that’s something they’ve consistently done for decades. Having a broad understanding of their patent portfolio allows them to maintain that level of revenue generation.

“Another client has pruned its portfolio by 30 percent, reduced maintenance costs, and been able to sell more than 10 sets of patents to bring in revenue to fund other IP activities. In the process, they also discovered some key assets required to defend key products, which they weren’t aware of before.”

And with all of the controversy around assertive licensing and so-called ‘patent trolls’, is there a difference in behaviour between NPEs and operating companies when it comes to patent assertion?

“We definitely support patent assertion as part of any sophisticated IP strategy. Our clients are investing in demonstrating the strength of their patents. They are spending hundreds of thousands of dollars to prove that their patents are valid and that they are in fact being infringed before pursuing a claim. To me that’s valid and strategic behaviour. It goes to show the value of the patents and is an effective way for companies to benefit from their R&D and patent investment,” says McLean.

Asserting patents is a three-part game. “It requires demonstrating that you have a valid asset; that it is infringed; and that the infringement impacts a significant revenue stream. If you can prove and articulate conclusively these three points then you can drive up the value of a transaction.”

It is important to bear in mind that what may work for one company may be the wrong strategy for another, depending on the profile of the company concerned. “We deal with companies across the spectrum, from start-ups through to billion dollar multinationals,” McLean says. “It really depends on the organisation’s strategic objectives.

We talk about IP in terms of a lifecycle, from investigating the space you play in and understanding the patent landscape to using the information to build a coherent patent strategy and then determining next steps of defending or monetising this asset.”

Large multinationals may have thousands of patents, while start-ups may have only a few. Regardless, it is important to work with each company to build the portfolio it needs to execute its strategy.

“With small companies we might be helping them to file just one patent to give them the most coverage and position them up for their future growth. For them, a patent may be filed as a foundational piece to be built upon going forward as the business grows or as they get access to more financing.”

There is one other key point that companies should consider when looking to maximise their patent value, McLean points out. Many companies will have separate departments for licensing, technology development, litigation and so on, but they rarely talk to each other. “In order to build stronger performance out of the patent programme it is essential to increase the communication between these teams.” Some organisations have set up a separate group to act as intermediaries but this is the role that an experienced IP consulting team can also play.

In a world where IP is becoming ever more important, companies that invest in putting the right patent management process in place will have a clear strategic advantage over those who don’t.

Mike McLean is senior vice president of professional services at TechInsights. He can be contacted at: mmclean@techinsights.com