By David French
“How can we find out whether we’re getting value for all the money we’re spending on patents within the company?”
This is a question I’ve heard before, and it’s a tough one to answer.
Corporations today are spending money on intellectual property. This includes not only patents but also trademarks and copyrights and occasionally industrial designs. All these items should be addressed in the modern high technology environmental. But a difficulty exists, particularly with respect to patents, in determining whether money invested in patents is money well spent.
There is a story going around that companies should have a large portfolio of patents in order to protect them in case they are sued by a competitor. The theory is that if you are sued then you will counter-sue, relying on one or more patents in the patent portfolio. But there is a fallacy involved in this scenario.
How is it that the person who’s suing you suddenly qualifies as infringing one of the patents in your portfolio? Clearly if they were infringing something in the portfolio then you should have considered suing them on your own initiative previously. The truth is, it’s unlikely that a company that takes the initiative to sue another corporation for patent infringement will all of a sudden be serendipitously found to be infringing part of the sued corporation’s “portfolio of patents.”
There is one other possibility that has to be considered. A company that sets out to risk infringing a patent may do an assessment not only of the patent they may infringe but also the possibility that the patent owner whose rights they intend to infringe may already be infringing rights owned by the prospective infringer. In other words, if you are planning to embezzle, you might wish to know that someone else who might report you has also been embezzling as well. Then you could lie low, continue embezzling, and when you’re confronted by this other party, announce that you have a secret recourse against such party if you’re turned in. This is always a possibility, but it’s a strange scenario, approaching a fantasy.
But let us return to the main theme: “Are we getting value for our investment in patents?”
This is a question that is not asked often enough. It’s a question that certainly hangs in the air when the CFO reviews billings from law firms that sometimes are well into five figure values.
Patents are costly. One quote that I have heard for preparing a patent application — that is, preparing the Specification that is part of an application — is that the cost would be between $10,000 to $20,000, possibly more, sometimes less. Processing fees are in addition. So patenting is an expensive exercise whether or not it’s being done properly or not.
And if a company simply proceeds on the basis that it’s essential to establish an inventory of patents, a portfolio, then one day they’ll find themselves carrying the costs of quite a considerable number of patents. Some will be issued, some will still be pending. Virtually all of them will be subject to annual renewal fee payments. Such annual fees cost, initially, on the order of $300-500 a year per patent including patent agency fees. These costs arise over time as a patent moves towards the end of its 20-year term.
If a portfolio has been accumulated, then paying such annual costs will be complicated by the fact that it would be a more expensive exercise to do an analysis of each individual patent to determine its worth to the company. It may be cheaper to simply pay for renewals than carry-out such an analysis.
If the analysis path is pursued, then some patents may immediately leap out as being important. For example, the founding of the company may have been on the basis of a master patent. But after that, further patents will likely be in the nature of improvements or potential opportunities that may or may not have matured over time. It costs so much to evaluate patents once they have started to mount in number that it’s often cheaper just to simply renew them year after year rather than carry out re-evaluations. But there is another way.
The other way is to do the patenting exercise properly in the first place. What does “properly” mean? In this circumstance, it means understanding and documenting clearly the rationale for each and every patent that is being sought. Two key persons best positioned for evaluating a patent are the inventor and someone from the marketing department. The best time to do such an evaluation is when an invention is initially presented as a candidate for patenting. A patent professional may also be involved, but this may not be necessary if one of the above two, particularly the inventor, understands how to apply patent claims.
These two persons, the inventor and someone from the marketing department, are key because they are closest to the business case for obtaining and maintaining a patent. If for no other reason than to provide a roadmap for future evaluations, the business rationale for obtaining any patent should be meticulously recorded at the beginning of the exercise. This is not an easy process to initiate or maintain.
Inventors, typically engineers, are not accustomed to providing a business justification for patenting their inventions. As inventors, they have a biased point of view. They think of their concept as a glorious newborn baby with enormous potential. They see the ingenious character of the solution that has been obtained to a technical problem. But ingenious invention does not necessarily give rise to an innovation which is meaningful in terms of its impact in the marketplace. Someone has to bring reality to this situation.
The marketing department can be quite effective in evaluating a patentable concept. That is, marketers can assess whether it has appeal to potential customers. If the marketing department within an organization is well organized, then it should also know whether competitors are already making something that is nearly equivalent, or are likely to do so in the near future. Therefore, someone in the marketing department has a key role to play in establishing the business case for patenting. Together, a representative of marketing and the inventor should address this issue, making a record for posterity.
If this type of invention analysis is pursued at the beginning of the exercise, the groundwork will be laid for doing future evaluations. The problem is to get the patent started on this basis in the first place. Someone in the organization has to exercise the discipline to do it right. This individual has to know the best way to evaluate a technical innovation in terms of its business case. It’s not a skill that is readily available. This capacity has to be created within the company. Ensuring that this is done takes initiative and persistence by management. To maximize the prospects that expenditures on patenting are likely to serve the organization’s bottom line will depend upon this capability being in place and being put to good use.
This is an ideal role for an Intellectual Property Coordinator within an organization.
