How Does Your Garden Grow – The Benefits Of Portfolio Management

A patent portfolio is like a garden – if it is to produce a bountiful crop, the plants must be carefully selected, planted and cultivated. The gardener must periodically till the garden to remove weeds which would otherwise take nutrients from more desirable plants. Finally, the successful gardener protects his crops from predatory animals and insect pests, and sells those crops which no longer meet his tastes.

Although it is not my normal style, let’s be serious for a moment. These are tough times. Businesses are tightening their belts (Okay, grant me one cliché). They are eliminating unnecessary expenses and they are looking for new revenue sources. No part of the business is – or should be – exempt from such scrutiny. That includes the patent portfolio. Businesses are – or should be – seeking to reduce the costs of securing and maintaining their patent portfolios. At the same time, they are – or should be – seeking to wring some revenue from the portfolio (the current buzzword is “monetize”). Let’s examine how both of these goals can be accomplished. (This blog will, of necessity, provide only a brief overview. For a more complete discussion, see the really great book – which yours truly co-authored – Essentials of Intellectual Property, by Poltorak & Lerner.)

Cost Reduction

The costs of securing patent protection are the product of (for the mathematically challenged, that means “multiply”) the number of patent applications filed and prosecuted, and the costs per application. Savings can be achieved by reducing the number of applications filed and also by reducing the cost of each.

Efficiently reducing the number of patent applications filed is largely a matter of proper portfolio management. This involves: identifying key inventions to be protected by patenting and then selecting the proper countries in which to seek patent protection (businesses often overshoot the target and wastefully file patent applications in countries where they confer no benefit). For reasons too numerous to mention here, these decisions are best made by a multi-disciplinary committee, known as a “patent committee,” (talk about creative naming) including R&D, manufacturing, marketing and legal personnel, led by a trained professional (if yours is a large business) or whatever smart people are available (if yours is not a large business).

Although not related to portfolio management, the unit cost of patent prosecution may often be reduced by performing a pre-filing prior art search. Frequently, this also yields an improvement in the quality of any resulting patent. Further, a search may establish that an invention is not patentable and that filing and prosecuting an application therefor would be a waste of resources. Further cost reductions and quality improvements may be achieved by demanding more complete invention disclosures from inventors. Note that it is not suggested that businesses transfer files to attorneys or agents with lower billing rates or who offer lower fixed fees. Generally, this merely results in lower quality patents. If it’s worth doing, it’s worth doing well.

Once a patent has issued, maintenance fees must be paid, or the patent will expire. Although these fees are periodically “adjusted” (governmentspeak for “increased”), they are presently about $900 after 3.5 years post-issuance, about $2,300 after 7.5 years, and about $3,800 after 11.5 years. (So-called “small entities” only need pay half of these amounts.) Clearly, a significant savings can be effected by identifying those patents which are no longer of direct benefit to the business and either selling or abandoning them. Identification of such patents is best performed by the patent committee.

Revenue Generation

Patents can generate revenues in three (3) ways¹: licensing, sale and enforcement against infringers. Patents which are no longer of direct or substantial value to the business (so-called “non-core” patents) can be sold or licensed. These patents can – or should – be identified by the patent committee. Patents which are being infringed may be enforced against the infringers (also known as “slimeballs”). Although patent litigation is expensive, there are firms, known (not surprisingly) as “patent enforcement firms,” which will undertake to enforce patents on a pure contingency basis. Hence, the patent owner risks no money—there is only “upside potential” (another current buzzword). Some law firms will also accept enforcement matters, to a greater or lesser extent, on a contingency basis.

THE LESSON TO BE LEARNED: Proper portfolio management is the key to both reducing portfolio costs and maximizing portfolio revenues. A good patent committee is the key to proper portfolio management.

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¹ Use of both the word “three” and the digit “3” indicates that the author is a highly educated attorney.