The “optics”—the visuals—of patent portfolios are often valued more than actual patent quality. Numbers of patents, patent claims, etc. may be prioritized over patent quality. Big companies are sometimes expert at playing this game. However, those wishing to create valuable patents need to address other factors, including:
Prior Art Searching
Was the patent prior art searched and if so, how extensively?
Was the non-patent prior art searched at all and if so, how extensively?
Did the inventor / assignee leave the searching up to the patent office?
Closely related to market factors are aspects of the inventions themselves. Is the invention narrow or broad? Amazon’s “1-Click” patent notwithstanding, broad inventions tend to be more valuable than very narrow inventions. There are several reasons for this: in the aggregate, royalties and/or damages in infringement cases may be higher for broad compared with narrow inventions and portfolios. Broad patents may make it difficult for competitors to “patent around” the inventions or to find new ways of solving a given problem that are as effective and efficient as the patented technologies. In addition, depending on the evolution of relevant markets, more parties may infringe broad than narrow patents.
Is the invention best thought of as a component of some larger product or service?
Is the invention sufficient to be the basis of a new product or service offering?
If component technology, who makes or would make the whole product?
Do prospective customers have a history of incorporating technologies from other sources or are they a “not invented here” culture?
Do prospective customers have a history of acquiring patents and if so, at what valuation?
Are there competing technologies that solve the immediate problem and if so, are those solutions more or less costly, or easier to manufacture?
How long does it typically take to get a “design win” in the relevant industry?
Patent Kinetics works with inventors, entrepreneurs, and investors to enhance the value of their patent portfolios and then works to monetize these portfolios through their sale, license or enforcement. Since Patent Kinetics works on a contingent fee basis, only a few cases of the many presented to us are accepted. The opportunities that we do accept are those where the prospective client has thought through—as best possible—relevant market, technology, and patent issues.
Many mistakenly believe that simply having pending applications and/or issued patents creates notable value. However, most patents are worthless. Research reports have found that only about 10% of issued patents ever return any value to their owners. Creating real value entails successfully overcoming significant challenges and a bit of luck. These challenges might be best understood by addressing most or all of the questions listed here. These questions can, of course, be used as a checklist for innovators or as a basis for preliminary due diligence by prospective stakeholders.
Creating a patent portfolio is time consuming and ultimately expensive. For a single US patent, some estimate that it may take on average $30K to create a patent specification and as much as another $20K for patent prosecution and maintenance fees over the lifetime of the patent. Yet it has been estimated that only 7% to 10% of US patents ever provide a monetary return to their owners.1
In evaluating patents for sale or enforcement, I frequently encounter a wide range of mistakes that detract from patent value. Here are some of the most significant errors and what might be done to avoid them.
(1) Being one’s own patent attorney:
An inventor does not have to hire a patent attorney to file an application at the US Patent and Trademark Office (PTO). Especially in these difficult economic times, the incentive to go it alone may be irresistible. If possible, resist that urge. There are so many rules and risks involved that will not be apparent at first blush, and even if you convince the PTO to give you a patent, you could find out years later that it is not worth the paper on which it is printed.