Most companies recognize patent portfolios as valuable business assets. They protect the investments made in research and development, and the efforts to bring products to market. As businesses evolve, and that cycle has only become shorter, patent portfolios should follow.
Patents cost a lot of money, both to acquire them and to keep them. In the United States, patents incur maintenance fees after they issue at the 3.5, 8.5, and 11.5 years. Failure to pay these fees results in the patent expiring, meaning it is no longer enforceable. Small entities in the United States will pay an extra $5,384, and large entities will pay $13,460, per patent, after issue. Further, many countries outside the United States charge maintenance fees, called annuities, while patent applications are pending, as well as after issue. In short, not only does acquiring patents cost a lot of money, so does keeping them in force.
Opportunities exist to monetize patent portfolios. You can license them to other companies either by yourself, or with the help of a licensing company. Licensing companies usually start a program using a company’s patents for a share in the revenue. Alternatively, companies can start a licensing program themselves. You can even sell parts of your portfolios outright to these types of entities or to competitors. One can think of these opportunities as “external” opportunities. Internal opportunities also exist.
Patent portfolio review provides an excellent internal opportunity to ensure your patent protection stays aligned with your business strategies. As patents and applications come up for maintenance fee payments in the U.S. and annuities worldwide, most companies look at the patents on an individual basis. They then decide to renew that patent or keep an application active. However, this may not give the best view of the overall portfolio. By doing the review on an individual patent basis, one may miss overall issues with the portfolio. It is also much more difficult to review the business strategy of the business unit with the patent strategy with such a small slice of it.
For a better understanding of a patent portfolio, companies should review them as a group on a periodic basis. Strategy planners often use the 3-5 year interval as a time to review business strategies, so it makes sense to use this same interval to review your patent portfolio strategies. The two timelines should relate to each other even if they do not have exactly the same timing. Larger companies, though, have thousands if not tens of thousands of patents and applications worldwide. Too frequent a review will take too much time to the detriment of other patent concerns.
An initial step in this process involves grouping your patents in some manner. Breaking the portfolios down into groups, such as by business units in the company, this task becomes more manageable. Further groupings inside these divisions may provide even more management workloads. Make sure that they do not get so focused that you lose the benefits of the bigger picture.
Smaller companies that do not have multiple business units could review patents by product lines, or by engagements with outside entities like universities and development partners. For even smaller companies, while it may seem unnecessary, it is a good idea to think about your patents as belonging to this or that product, or this or that technology. These will form the seeds of your portfolio as you grow.
Once you have a view of the lines along which your patents align, you can match up the amount of money spent on acquiring the patents, and the amount of money spent on R&D and/or product development in that area. Things to look for include higher amounts of money spent in one area for patent protection that does not match proportionally with the R&D or product development money spent. Continuing to file for patents in a now defunct or shrinking product line does not really make much sense. But until you get a look at how the money matches up, you may not even realize that you are doing that. That money could help the growing product lines to provide more R&D or more patent protection.
Similarly, spending a lot of money on R&D for a new or developing line of business or family of product and not matching that with a proportional amount of money on your patent protection raises another flag. Now, the timing between R&D and patent filings does not exactly line up. Often, preliminary R&D will occur before anything patentable emerges. It does at least warrant a review.
The main advantage here lies in getting an overall view of the contents of the portfolio in light of your current business strategy. This provides a look at where you spend your patent money to compare it to your research and development money. Importantly, do not just look at the money you spend on filing. Look at money you spend to maintain patents that no longer have much use to your company. These could become candidates for sale or licensing as external opportunities. Internally, decisions NOT to pay the maintenance fees can redirect that money to either more patent protection for current and future business and research and development efforts.
These recommendations come with some considerations. First, you may want to keep a small portion of their patent budget for “blue-sky” and more speculative inventions. This keeps innovation growing and may provide a foundation for a future core business line of the company. Also, do not become so involved in the planning process that it limits the ability to get patent protection. Too frequent, or too in-depth, reviews will take time away from building the patent portfolio or other monetization efforts.
In summary, taking an overall, strategic look at your patent portfolio can save you pennies, lots and lots of pennies. Our experienced and skillful patent attorneys here at Miller Nash can help you with this process.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
