A constraint for patent departments
in companies both large and small is their budgets. According
to in-house sources, costs are not rising enormously but are
going up with inflation and IP units are increasingly expected
to do more with less money. One source says his patent budget
has not changed in six years.
Six corporate lawyers from patent-focused businesses tell
Managing IP that these pressures are driving in-house counsel
to find efficiency and cost-saving gains – and one
place they’re looking to more and more is their
The challenge is to find the right balance in portfolio
expenditure so that the business is sufficiently protected but
not over-covered. To do that, counsel are increasingly setting
up cost-monitoring and value appraisal systems to work out
which patents add value to the business and which do not. But
such mechanisms can be tricky to get right.
"Once you know what you have and what you spend on it, you
can work out whether it is a good investment or not," explains
a senior European patent attorney at a Swiss confectionery
company. "It is difficult, however, to measure the value of a
patent portfolio or accurately measure costs."
Know your value
The first challenge for patent departments looking to get
more for less from their portfolios then is working out how to
value patents. A good way for businesses to do that, according
to in-house counsel, is to review portfolios using set
indicators to determine value.
The confectionery patent attorney says that value assessment
should not be a matter of simply gauging monetary value, but
how much of the business’s portfolio is protected,
to what extent and how widely as well.
An IP manager for a large plastics manufacturer agrees that
this is an effective way to evaluate patent value, but adds
value indicators should, and likely will, vary between
different businesses and sectors and what they’re
looking to achieve from their IP.
"I’m not sure the same system could be
implemented for every business, although there are clear
criteria that we may have in common," he explains. "The
evaluation system I have put in place is focused on the key
criteria we want to focus on, and I’m not sure
another company would do the same sort of analysis."
He adds that many companies, such as his, are beginning to
put similar mechanisms in place to gauge the protective
potential of the firm’s patent portfolio.
His company has set up a yearly review process that begins
six months before the start of the fiscal year, which involves
looking at each patent in each country and speaking to people
from R&D, sales, marketing and communications. The firm
then evaluates each title based on objective and subjective
criteria, such as the age of the patent, its defensive
potential, the activity surrounding it and enforcement success
rates to determine which registrations to invest in.
The head of IP at the commercial arm of a UK university adds
that such an analysis is a useful exercise because it helps
companies put their patents into a pecking order – but
it is not always an easy process.
But the value of a patent is ultimately determined after it
is offset with the overheads for establishing and maintaining
The confectionery patent attorney says overall patent value
depends on factors such as how much it costs to register and
renew patents in the areas the business needs them in, how hard
the business will need to fight IP offices to get the rights
granted and how often and in what ways it will need to enforce
"We have not cracked the nut just yet," he says. "We have
some mechanisms in place but these solutions may not be perfect
and it is an evolving process."
And calculating those costs is not an easy feat, according
to in-house counsel. The head of IP at a telecommunications
company explains that official costs, such as registration and
renewal fees, can easily be recorded, but unexpected costs or
external costs, such as enforcement expenses, are more
difficult to predict.
"Costs is a very complex topic and my biggest obstacle in
patent portfolio management," he says. "There are companies
working on that with a good amount of success. We are also
working on our own tech solution to this problem."
The IP manager at a Cambridge-based tech company agrees that
external costs are tricky, and adds that his
company’s biggest challenge is predicting when an
examiner will fail to understand the inventive step of a
particular invention and the business will need to spend time
and money sending further explanation and evidence or otherwise
challenging the rejection.
In-house counsel tell Managing IP that software solutions
will likely become more prevalent in these kind of cost
appraisals. The telecommunications head of IP says that
software solutions can help find indicators to help businesses
make effective value evaluations, such as the scope of a patent
family. But soon they may also be able to provide a relatively
reliable forecast of portfolio costs.
The tech IP manager adds: "I have had conversations with
other IP counsel who have used patent management suites to
anticipate costs with a good degree of accuracy." He says that
the next step is to have a rational means of determining where
to spend and save money.
Once a business has determined a patent’s total
value, it can decide on the right level of expenditure to
buttress its defensible capability.
Of course, the portfolio analysis process is as much about
finding patents that the business can get rid of as much as
finding those that should be invested in. A patent for an idea
that did not turn out to be valuable or could not be
commercialised is usually a drain on the business –
one that sucks up resources that could be better spent on
business-critical IP and ultimately reduces profit.
The director of IP at a multinational pharmaceutical firms
tells Managing IP that this is quite a common problem in the
drug manufacturing industry, which has a tendency to patent
every invention it comes across because it could have the
potential to become a medicine.
To solve this problem, his company has been going through a
process of looking at patents after five to eight years and
assessing whether they’re likely to be
commercialised, shared in a research project or further
developed, rather than maintaining the registrations until
"If the invention is unlikely be used in any of those
capacities, we abandon the patent," he says.
"We’re also trying to be more diligent when it
comes to what we file for in the first place."
The director adds that in any pharmaceutical patent
portfolio there will be registrations with clear commercial or
patient value and there will be those with questionable added
value, and the point of this exercise is to work out which ones
are which. This trend, he says, can be seen in many large
pharmaceutical companies – although there are many
others that are continuing the traditional patent-everything
The head of IP at a telecommunications firm says shedding
patents is a sensible strategy because not only does it reduce
renewal fees but a patent department can work with a portfolio
of 200 patents, for example, much more easily and efficiently
than on one containing 300.
But patent counsel do not necessarily need to get rid of the
IP altogether. The UK university IP head says that his
organisation undergoes a similar annual process of determining
patent value and then chooses to either shed the patents or to
reduce investment in it.
"If we have not got anywhere with a patent and not found a
commercial partner, we do a cost-cutting exercise where we cut
countries out," the IP head says. "We are not frivolous but we
may whittle down coverage to the bare minimum.
"If we want to shed the patent, we offer it back to the
inventors to develop their invention as they wish."
Stagnant budgets are forcing in-house counsel to be more
stringent with their portfolio spending but there are clearly
wins to be made by working out which patents are worth the
business’s while. The process is tricky but as
processes evolve and software solutions become more
sophisticated, patent departments will get better and better at
shedding portfolio costs.