To Abandon or not to Abandon - Generating Value from Mature Patents
Introduction
Limited patent portfolio visibility is a challenge facing IP intensive organizations around the world. Getting to the granular level within a four or five figure patent portfolio is a difficult task that is not being adequately addressed by traditional research and due diligence methods. Fundamentally, each patent should be treated as a P&L within the greater portfolio, and any inefficiency in doing so can lead to unnecessary expenses incurred by the organization.
While the costs for developing, protecting, and maintaining a patent are relatively straightforward to calculate, it is the actual market value — what the patent could be sold for on the open market — which is often misinterpreted. The market value of a patent depends on different factors such as the type of invention that it is protecting, the market for that invention, and the speed of growth for that market. Many patented inventions never become commercially available, and as a patent ages, the likelihood of becoming commercially available will diminish. Therefore, one can make a more informed decision on maintaining or abandoning a patent when the patent is 10+ years old, based on the availability of the invention in the market and size of that market. The difficulty in making an informed decision lies in finding evidence of use for a patent, especially if that understanding requires expertise in the subject matter.
At Patexia we have leveraged the power of crowdsourcing with a large global network of subject matter experts to provide more visibility for the patent portfolio. Crowdsourcing empowers us with the highest quality information and an unparalleled level of visibility, which in turn leads to better and more confident decision making, with respect to the treatment of mature patent asses.
Figure 1. Crowdsourcing can provide the a broad perspective
Crowdsourcing is a powerful problem solving technique which leverages the combined knowledge of a diverse crowd to draw a conclusion about a matter. For many problems, the solution resides within the domain of publicly available, yet difficult to find, information. In these situations, crowdsourcing is a particularly effective tool, as demonstrated by applications such as Wikipedia and Quora.
At Patexia we have applied this concept to solve patent problems. Successful projects across the Patexia platform have included validity, evidence of use, patent mining, freedom to operate, and targeted market research. As shown in Figure 1, a large crowd with diverse language capabilities enjoys a unique level of scale and perspective. Crowdsourcing also allows different people with different perspectives and access to different resources to work on the same problem in pursuit of the highest quality information available.
How it Works
A challenge inherent to intellectual property is that it exists at the intersection of the business, legal, and technical realms. Oftentimes, a complete assessment of a patented technology requires true expertise in all three areas, and although experts from each area may be involved in the process, they most likely won’t be fluent in the language and terminology used outside of their core area of expertise. As shown in Figure 2, a successful crowdsourcing platform acts as a bridge, connecting problems with problem solvers in a meaningful way, and breaking down language and terminology barriers.
Figure 2. Patexia acts as a bridge between IP problems and problem solvers
Examples
Understanding the full scope of commercial use for a patented technology is a complex task that is well-suited for crowdsourcing. With a complete view of the landscape at ones disposal, decision making on abandonment for cost savings benefits from true confidence and foresight.
In the following scenario, it is assumed that a portfolio of five patent families is being considered, and that each of these five families include patents (with 20 claims a piece) filed in the US, Germany, Japan, and Korea, for a total portfolio of 20 patent assets. It is also assumed that all maintenance payments will be made throughout the lifetime of the patents, and that fees are current as of January 1st, 2014.
Cost Savings
Considering a 20 year lifetime of a patent family filed in the US, Germany, Korea, and Japan, one can expect to pay $69,395.62 in maintenance payments and annuities per family. Looking at a small portfolio of five families, the total cost is $346,978.10 over 20 years. While high quality patents can generate many times the revenue compared to what they cost to maintain, the owners of larger portfolios often don’t consider the impact that maintaining non-core, potentially lower quality patents have on their bottom line. Figure 3 shows that this issue not only persists throughout the lifetime of a patent, but that it is exacerbated in years 11-20 ($52,588.10 cost to own per family after year 10), as maintenance costs make a jump, beginning with the third US maintenance payment at 11.5 years.
A major factor driving the value of a patent, especially as it matures, is the degree to which the technology is being used. Naturally, the level of use may vary in different markets, and it will vary between different countries. Crowdsourcing to uncover the entire evidence of use landscape will allow a portfolio manager to confidently abandon or divest patents with little to no use in a particular market, while maintaining the assets in markets where use is more prevalent. Using this methodology, unnecessary or unwise maintenance payments will be avoided, saving money across the department for years to come.
Figure 3. Maintenance costs over time per patent family (years 10-20)
Concluding Remarks
Limited patent portfolio visibility is a challenge that can be successfully addressed by crowdsourcing. Analyzing individual patents as unique assets from a P&L perspective can allow an organization to reduce the cost of unnecessarily maintaining non-essential patents while potentially increasing their revenue from the sale or out-licensing of intellectual property.