Patent portfolios as offensive and defensive powerhouses

published in McAfee & Taft TIPsheet | June 2, 2016

By Ryan Cross

Patents can be a key part of supporting and leveraging your business but can be costly to procure and maintain. The true value in patents derives from the right to exclude others from making, using or selling the patented invention, which allows the patent owner to use the patent both offensively and defensively.

Offensively, patents:

  • Discourage others from entering the field, creating a barrier to entry
  • Provide an additional revenue stream through licensing
  • Stop competitors from directly copying the patented invention

Defensively, patents:

  • Discourage others from filing
  • Provide an opportunity to settle infringement issues in the early stages by cross licensing

Ideally, a few broad, valid patents would cover your business operations and provide you with all the protection you need, but this is rarely the case. Existing prior art can make it hard to get broad patent coverage, and even if it is available, the diverse nature of your business, its products, equipment and processes may not lend itself to being adequately covered by a few patented inventions. A large patent portfolio offers enhanced protection by the collective value of the entire portfolio, as it can cover both broad inventions and narrower improvements over diverse areas of your business. Large portfolios limit the risk of invalidity by lessening the impact if one of the patents is declared invalid. Further, the sheer number of patents deters potential infringers and competitors, who assume you have effectively marked your territory within an industry. A large patent portfolio is a powerful tool in establishing market power and minimizing risk, but can have a substantial price tag associated with it.

To ensure you are getting the greatest benefit from your patent portfolio while maintaining cost control, you need to conduct a review on a regular basis. Any patent portfolio review should include the following considerations:

  • Frequency
    Timing is everything. Depending on the size of your portfolio and the nature of your business, the entire patent portfolio should be reviewed every one to three years, and/or anytime there is a substantial change in your business focus or a substantial acquisition of assets, especially where the acquisition includes patent rights.
  • Relevancy of the Covered Technology
    Each patent and patent application should be reviewed to determine if it is still relevant to the business. In other words, is the claimed invention currently or likely to be made, used or sold by the business or its competitors? If the answer is no, consider divesting the patent.
  • Relevancy of the Patent Jurisdiction
    Maintaining patent filings in multiple countries can be expensive, so the review should examine whether the patents in some countries can be divested. Patents for each country should be examined to determine if the business or its competitors are likely to manufacture there, or if the patented invention is likely to be used or distributed in the country.
  • Monetizing Non-Relevant Patents
    Before abandoning any patent or patent application that is no longer relevant to the business, think about whether the non-relevant patent can be sold or licensed to another company. In a sale or license arrangement, care should be taken to make sure that any resulting royalty or revenue stream is appropriately secured.
  • Review the Remaining Life of the Patent
    Because fees associated with maintaining a patent increase during the life of the patent, it is important to assess whether the protection provided by the patent is worth the cost of maintaining it. If the patent has only a couple of years before expiration, it may have little market value as an asset for sale.
  • Identify Areas that Need Coverage
    Evaluate whether there are gaps in the protection provided by the patents. Look not only for present gaps, but also ones that will occur in the near future when patents expire. Gap areas can be addressed by focusing research into developing improvements for technology in these areas or by considering whether patent assets can be acquired from another party to provide additional coverage.
  • Establish or Revise Filing Lists
    To help with future foreign filing decisions, lists can be created or revised at the time of the review to define a different geographical scope for the filing of patent applications based on the technology area, the scope of the patent application, and the primary reason for seeking patent protection. For example, for a patent protecting a product, the patent needs to be filed at least in countries in which the product is manufactured and marketed. Similarly, for patents filed primarily to provide freedom to operate by disclosing the invention, one country is sufficient, and may even be dropped after publication.
  • Patent Licenses
    If your portfolio contains licenses of patent applications, be aware that bankruptcy laws give special rights to patent licensees. If your licensor files bankruptcy, you have the right to retain your rights for the duration of the license, among other rights provided in the Bankruptcy Code. If you learn that a patent licensor files bankruptcy, you should seek advice from a bankruptcy lawyer as soon as possible.

Finally, record your decisions as you perform your patent portfolio review. For example, use a spreadsheet to list the patent families, countries of filing, current use of the claimed invention and your review decisions. Once the spreadsheet is made, it will be a valuable tool that greatly simplifies the process for subsequent patent portfolio reviews.