Patents can add significant monetary value to businesses. But as intangible assets, they present special challenges when it comes to valuation and investment decisions.
One approach for valuing patents is to consider potential future cash flows or cost savings that the technology could produce, as shown in the diagram below. This method of valuation has its advantages as illustrated here.
Create Patents at Low Cost
As companies grow they often secure patents covering innovations within their industry. Patents serve as intellectual property (IP), providing legal rights that allow a company to stop others from using its invention without permission. Patents are vitally important as they allow a business to produce products and services protected by IP rights.
Not all patents in your portfolio may be fully utilized and therefore constitute a financial drain on your company. To avoid this situation, it’s vital that companies find ways to extract value from unused patents that were acquired only at a cost but may actually generate revenue for them in return.
This research is focused on discovering how a company can extract value from its non-core patent portfolio by considering both portfolio and market aspects when extracting value from it.
Assessing the cost of patents in your company
Beginning an analysis from a technological viewpoint is key, which can be accomplished by creating a tech tree. This will provide an excellent overview of which technologies your portfolio covers, as well as help, identify which patents could potentially be valuable.
Second, it is crucial to assess the demand for technologies covered by patents. This could either be potential demand anticipated in the near future or existing demand that already exists in the current market.
As part of this, it’s vital for businesses to understand which markets their technologies are applicable in, as well as those which show promising growth. This will allow the company to target those potential markets where it can make the greatest return on investment.
Finalize the analysis by reviewing the legal status of all the patents in your portfolio. This step can save the company royalties for patents no longer valid and prevent legal disputes with companies who infringe upon them.
Identify Patents with Commercialization Potential
Financial gains from managing a patent portfolio don’t stop at licensing revenues alone; they can also help companies achieve market dominance, protect against patent infringement threats, and open acquisition opportunities. For example, if your firm develops technology patented by another firm and that firm attempts to enter your market via patent litigation proceedings, your patent portfolio might help block them by barring entry; you might even be able to buy outright at an attractive price point.
Uncovering which patents have commercialization potential can be challenging. According to one estimate, US companies let over 35% of their patented technologies go unused; product development projects often take years and then can become vulnerable due to unexpected infringement suits that weren’t anticipated beforehand.
Patent infringement lawsuits can cost companies millions to defend against, so companies need to identify patents with commercialization potential and devise plans for capitalizing on them early in the process.
Metrics to identify patents with commercialization potential
Patents that hold significant commercialization potential can be identified using two metrics, Hallmark Patent Quality (HPQ) and Indicative Patent Quality (IPQ). HPQ focuses on how critical each patent is to your company’s future growth within a certain technology area; IPQ considers patents that contribute directly to existing products. An optimal way of assessing this is through big data analytics systems which use past patent data to learn from past data sets, learning from each patent’s past scores to generate an indicative quality score for every individual patent.
Many companies rely on patents as a defensive mechanism, to keep rivals out of their markets or establish product leadership or reduce acquisition risk. Hitachi uses patent walls to secure development only of those products for which it has strong patent protection such as automotive airflow sensors – using them to block rivals and establish its dominance in this market.
Smart pharmaceutical and biotechnology companies consider patent strength when selecting their drug development projects. Genetics Institute makes its decisions regarding which iteration of a new medication they pursue partly based on which will have stronger patent protection. Similarly Gillette chose its Sensor shaver not solely because it was technologically superior but due to the strength of its patents.
Adopting Patent Data Analytics Solution
Patent portfolios can be more than just collections of inventions; they’re an invaluable source of insight into the technology landscape. A patent data analytics solution plays an essential role in helping assess patent value.
Roles of adopting a patent data analytics solution
Patent data analytics solutions can assist businesses with identifying relevant patents and capitalizing them before their validity expires. They can also help companies identify potential licensing partners to approach for possible licensing agreements and use patents as collateral against loans or report them as part of company balance sheets for a more accurate valuation of businesses.
As with most forms of information, patent information presents several challenges due to its quality of raw data and lack of reliable methodologies for assessing value. This is especially problematic when applied to applications and large multi-patent portfolios with varied patent types, statuses, and ownerships – not to mention legal status changes over time – so employing an analytical solution capable of accurate, consistent, and comprehensive analysis is absolutely crucial for making informed decisions based on this data.
Sagacious IP’s patent data analytics software offers users a powerful yet user-friendly platform for extracting insights from patent data. Users can quickly build, refine and filter patent searches based on specific criteria. Additionally, it supports a range of additional analytic tools including entity and ownership patent links, trend analysis, and technology horizon scanning.
Mid-range and large companies alike often rely on strong patent portfolios as a source of confidence in their freedom to operate (FTO), helping negotiate more advantageous contracts, licensing-in, and cross-licensing activities, as well as protecting themselves against patent lawsuits in the long run. Indeed, given that business has increasingly moved towards abstraction from tangible businesses and assets, patents are now seen as markets in their own right.
Strategic Licensing Partnerships
Companies can maximize patent value by partnering with businesses that share similar technologies or expertise, using patents as passports into new markets that offer a competitive advantage for them both.
Patents not only generate revenue for companies but can also boost their reputation and position within an industry. For instance, an innovative battery design might allow one company to partner with automotive manufacturers on developing an entire lineup of electric cars.
Effective patent portfolio management can help businesses lower expenses by lowering maintenance fees and taxes. Patent managers need to conduct careful evaluations of each individual patent to assess its strength and relevance, as well as market research for licensing opportunities. By taking such steps, a business can ensure its intellectual property is being maximized while realizing maximum return on its investments.
Companies that fail to leverage their intellectual property effectively often become mired in costly litigation battles with “patent trolls.” These aggressive enterprises specialize in buying and licensing patents from large businesses before filing lawsuits for violations against these patents – cost-intensive litigation can damage a brand’s image and bottom line.
Prerequisites for efficient patent portfolio management
Effective patent portfolio management requires an approach that encompasses engineering, legal, and marketing expertise. To get maximum return on their investment, businesses should partner with an IP firm offering full services from ranking patents to licensing opportunities identification – something Sagacious IP’s F3 analysis methodology provides.
Technology companies require an aggressive patent strategy tied to overall business goals in order to be successful. Successful firms often share three traits; these include having a clear definition of their intellectual property coverage; conducting comprehensive market research to identify licensing opportunities; and working closely with their licensing partners to make sure their agreement achieves desired results.
Today’s connected world relies on an intricate web of standards and patent technologies, each essential for operating at peak performance. Determining whether one patent is essential is both difficult and costly.
IP professionals need access to reliable and detailed information about the essentiality and FRAND rates obtained from patent filings, declarations, and standards contributions.
Use AI Tools to Draft Patents and Align R&D and Patent Strategy
Modern life is made possible through standards, which enable devices and systems to interact. These standards are built upon technologies; manufacturers use those building blocks in the products they produce. Such patents protecting essential technologies for standards are known as standards-essential patents (SEPs).
SEP portfolio management goes beyond simply prosecuting and enforcing acquired patents; it involves aligning R&D and patent strategy with standards development activities and licensing campaigns. To do this effectively, patent teams need access to IP data tools and processes capable of delivering high-quality search results, identifying SEPs in the marketplace, monitoring ownership changes over time, and supporting FRAND negotiations and licensing campaigns.
Various IP data tools and processes in order to keep up with standards contribution data, patent declaration data, legal status information, and legal status updates. This enables them to search prior art more efficiently as well as understand competitors’ participation activities during standardization processes and the level of contributions made by competitors.
Reliable and comprehensive patent data allows companies to identify hidden gems within their SEP portfolios for licensing or selling, making the best decisions when it comes time for FRAND negotiations or finding SEPs that could potentially make good license candidates.
Patent applications require significant resources and legal representation to prepare and prosecute internationally. This ongoing cost must be balanced against SEP licensing revenues or cross-licensing deals; correct portfolio sizing requires an understanding of how patents are being utilized and their business value rather than simply potential royalties alone; data analytics are an ideal way of helping make this determination.
As 5G technologies rapidly advance, its patent landscape is changing quickly as more companies participate in its standards development process, leading to higher volumes of patent declarations and contributions that optimize patents for this next generation of connectivity technology. This development is encouraging as it means more patents can be optimized to benefit this emerging connectivity technology.
ZTE’s SEP portfolio management strategy
According to Mang Zhu, SEP strategy manager at ZTE, organizations must align their R&D goals with standards development and patent prosecution work in order to file patents that satisfy essentiality and validity criteria and support licensing campaigns.
She believes that any successful SEP strategy must be supported by highly-skilled patent prosecution teams that align with their company’s long- and short-term product development plans, as well as IP data analytics tools, to gain an accurate view of both the standards landscape and patenting activities of competitors.
ZTE requires that its SEP portfolio is regularly sized and calibrated to meet both product development needs as well as market requirements. When corporate relevance diminishes, portfolio assets should be reviewed for sale or abandonment consideration; by using data and analytics for decision-making purposes, ZTE can ensure it maximizes returns from its patent investments.
Patent Prosecution Increases Quality
Patent prosecution’s goal is to establish a solid and robust patent that will safeguard your technology or discoveries. While this can be a lengthy and expensive process that takes many hours of attorney work to successfully draft and prosecute, it’s worth it: an outstanding patent protects both your invention as well as providing opportunities for SEP licensing opportunities – which should form an essential component of your overall business strategy.
Turning an innovative idea into a viable patent takes years. From the moment your company creates cutting-edge solutions or discovers novel ways of furthering techniques, working with intellectual property professionals should become your top priority in protecting it and filing patent applications. Our attorneys at PatentPC have decades of experience evaluating technologies for patentability allowing us to assist clients from brainstorming meetings through to drafting and filing.
Prosecution of patent applications can take months or even years before completion. Along the way, numerous amendments will likely need to be filed in order to strengthen and expand your application by adding broad claim language, exploring other variations, or providing more details of embodiments to increase the chances of a grant.
Patent Declarations and Contributions
As technology standards emerge, patent holders are obliged to notify standard-defining organizations of any patents covering aspects of these standards via the SEP Declaration process. This requirement provides patent owners an incentive to participate in standards development while making sure that their technologies remain available to all those implementing or licensing new technical specifications – implementation companies as well as potential licensees who wish to utilize SEPs under fair, reasonable, non-discriminatory (FRAND) terms.
Senior IP professionals should analyze not only patent filing data but also standardization data such as declarations and contributions from patent filings to better align their patent portfolios to protect innovations while engaging in strategic activities like licensing, joining patent pools, or acquisitions related to SEP assets. Doing this will also help combat the classic tragedy of the commons where inventors spend time and resources trying to prove the essentiality of patents that may not actually be essential, only for patent assertion entities to pursue their arguments regardless of potential rights violations from implementers or SEP holders.
Extracting value from a patent portfolio can be a strategic and lucrative endeavor for businesses in today’s competitive landscape. Patents, often regarded as a valuable form of intellectual property, hold the potential to unlock numerous opportunities for growth, revenue generation, and market advantage. To effectively extract value from a patent portfolio, businesses must adopt a multifaceted approach that encompasses various key elements. By leveraging patents strategically, protecting intellectual property rights, and capitalizing on market opportunities, companies can position themselves for long-term success, revenue growth, and sustainable competitive advantage. Ultimately, the effective extraction of value from a patent portfolio can serve as a catalyst for innovation, economic growth, and the advancement of society as a whole.