Patent Portfolio Management

1
Patent Portfolio Management

• By
• Michael A. Leonard II

2
Definition

• Patent portfolio management refers to the
  practice of determining what to patent, how to
  proceed during the patent application drafting
  and prosecution process, and how the patent is
  eventually used by a company

3
Goals

• A patent portfolio management strategy should
  accomplish three goals
• Determine what inventions should be patented
• Determine how patent applications should be
  drafted and prosecuted and
• Determine how patents should be used and whether
  they should be monetized

4
Determining Patent-Worthy Inventions

• Determining what inventions should be patented
  requires, first and foremost, that an
  organization identify what potentially patentable
  technology the company has developed
• The value of various technologies is highly
  industry-specific
• It is beneficial for patent professionals to work
  closely with engineers and scientists to
  determine which technologies exist within a
  company

5
Incentivizing Engineers and Scientists to
Disclose Inventions

• In a large corporation, it may be difficult for a
  relatively small number of patent professionals
  to be aware of all of the new technologies being
  developed within the corporation
• An effective way to encourage disclosure is to
  offer inventors a financial incentive for
  disclosing inventions for instance, perhaps the
  corporation may choose to offer inventors 1,000
  for disclosing an invention and participating in
  the patent drafting process where a patent
  application pertaining to the invention is later
  filed

6
Offensive v. Defensive Patents

• Patents may be valuable for both offensive and
  defensive purposes
• Patents used offensively may result in licensing
  revenue and, sometimes, in damages awards from
  litigation
• Patents used defensively may make it less
  attractive for a competitor to sue for instance,
  if you infringe a competitors patents and they
  also infringe yours, litigation may result in a
  war of attrition where both sides would spend a
  large amount on legal fees and realize a small
  amount, if any, in monetary damages
• It may also be useful for marketing purposes to
  have a large patent portfolio (portfolio
  padding) so a corporation can claim that it is
  more innovative than its competitors in a given
  market, although the actual value of this
  approach is difficult to determine
• Most patents are used defensively or for
  portfolio padding

7
Determining Whether to File

• In order to determine whether to file a patent
  application, it may be beneficial for patent
  professionals to consult engineers and to conduct
  a brief patentability search to determine the
  state of the art
• If the art is crowded and/or the invention
  appears to be a narrow improvement over what
  already exists, filing may not be beneficial
• It may also be beneficial to consider whether it
  appears likely that a competitor uses the
  technology, or may use the technology in the
  future
• The potential value of a patent to be monetized
  (if a patent is to be used offensively) is
  difficult to determine, but may be assisted by
  knowledge of a competitors products using the
  technology (perhaps sales multiplied by a
  licensing rate of 5 the many licensing
  strategies for determining patent value are
  beyond the scope of this presentation) or, in
  standards-rich industries such as telecom,
  adoption of the technology in a standard
  increases the value for licensing
• Another consideration is how difficult it is to
  detect infringement

8
Application Drafting Strategies

• Due to the difficulty in determining the
  potential value of a patent, it is generally
  beneficial to draft every patent application
  properly and not cut too many corners to save
  cost
• Spending more money on the front-end to develop a
  well-written, thorough patent application with a
  good set of claims directed to one invention at a
  time (for disclosures having multiple inventions,
  multiple continuations may be filed, leading to
  extra fees) can save money during the patent
  prosecution process by increasing the Examiners
  understanding of the invention and reducing
  non-art-based objections and rejections, such as
  those under 35 U.S.C. 101 and 112
• Including the inventors in the process may
  significantly increase the quality and accuracy
  of the disclosure

9
Patent Prosecution

• During patent prosecution, it may be beneficial
  to conduct personal Examiner Interviews after the
  first Office Action to ensure that the Examiner
  understands the invention and the art
• Personal Examiner Interviews, while more
  expensive, tend to be more beneficial in the long
  run due to the ability to show the Examiner
  figures and text, as well as the ability to gauge
  how cooperative the Examiner may be from body
  language it is also more difficult (although
  certainly not impossible) for one party to remain
  committed to flawed reasoning in the physical
  presence of the other party
• This can further reduce prosecution iterations,
  lower the cost of patent prosecution and obtain
  allowances more quickly

10
Appeals

• Appeals can be an effective tool where Applicants
  believe an Examiner is incorrect, but the
  Examiner will not budge from his or her position
• While appeals are more expensive than filing
  Responses, this may be more cost effective in the
  long run than continuing fruitless prosecution
  before the Examiner
• Where clear error exists in the rejections, a
  Pre-Appeal Brief Request for Review can be a
  cheaper way to overcome the rejections and obtain
  a new Office Action or Notice of Allowance

11
Managing Maintenance Fees

• Once an application has issued as a patent, the
  value of the patent should again be considered
  each time a maintenance fee is due
• Maintenance fees start lower and become
  progressively higher as more time passes the
  first maintenance fee due at 3.5 years is 980,
  the second maintenance fee due at 7.5 years is
  2,480 and the third maintenance fee due at 11.5
  years is 4,110
• Naturally, if a patent generates more in
  licensing revenue than the cost of the
  maintenance fees, these fees should be paid
• Where a patent is used defensively or for
  portfolio padding, it should be examined at 7.5
  and especially 11.5 years whether competitors use
  the technology

12
Patent Renewal Rates

• Source PatentlyO (http//www.patentlyo.com/paten
  t/2010/02/uspto-budget-shortfall-causes-maintenanc
  e-fees.html?cid6a00d8341c588553ef01287773c61d970c
  )

13
Determining Infringement

• Especially for offensive patents, it is
  beneficial to consider how easily infringement
  can be detected
• If infringement is readily detectable, it may be
  beneficial to monitor competitors to determine
  whether licensing revenue can be obtained
• A reasonable licensing royalty can help to avoid
  litigation and encourage competitors to quickly
  agree to license the technology

14
Reexamination

• Recently, as a defensive measure, some large
  companies have started monitoring the patents
  issued to competitors and, especially, those
  obtained by patent trolls
• Where a patent issues having claims that appear
  to read on a companys product, it may be
  beneficial to push the patent into reexamination
  if art exists that is believed to teach the
  claimed features
• Courts may not grant a stay of litigation until
  reexamination proceedings are concluded
• A risk of reexamination is that if the patent
  survives, the presumed validity of the patent
  will likely be strengthened

15
Conclusion

• Patent portfolio management is highly
  industry-specific and requires expertise and
  careful management in the company
• A strong strategy can mitigate expensive
  litigation and, in certain cases such as with IBM
  and Texas Instruments, can result in a licensing
  revenue stream that generates significant revenue
  for the corporation