Patent Portfolio Patent Portfolio ManagementManagement

By:By:

Michael A. Leonard IIMichael A. Leonard II

DefinitionDefinition

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

GoalsGoals

A patent portfolio management strategy should A patent portfolio management strategy should accomplish three goals: accomplish three goals:

1.1. Determine what inventions should be Determine what inventions should be patented;patented;

2.2. Determine how patent applications should Determine how patent applications should be drafted and prosecuted; andbe drafted and prosecuted; and

3.3. Determine how patents should be used Determine how patents should be used and whether they should be monetizedand whether they should be monetized

Determining Patent-Worthy Determining Patent-Worthy InventionsInventions

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

Incentivizing Engineers and Incentivizing Engineers and Scientists to Disclose InventionsScientists to Disclose Inventions

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

Offensive v. Defensive PatentsOffensive v. Defensive Patents

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

Determining Whether to FileDetermining Whether to File

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

Application Drafting StrategiesApplication Drafting Strategies

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

Patent ProsecutionPatent Prosecution

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

AppealsAppeals

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

Managing Maintenance FeesManaging Maintenance Fees

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

Patent Renewal RatesPatent Renewal Rates

Source: PatentlyO (http://www.patentlyo.com/patent/2010/02/uspto-budget-shortfall-causes-maintenance-fees.html?Source: PatentlyO (http://www.patentlyo.com/patent/2010/02/uspto-budget-shortfall-causes-maintenance-fees.html?cid=6a00d8341c588553ef01287773c61d970c)cid=6a00d8341c588553ef01287773c61d970c)

Determining InfringementDetermining Infringement

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

ReexaminationReexamination

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

ConclusionConclusion

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