Faced with a combination of time, resource and budget constraints, in-house counsel are increasingly looking to dredge through portfolios to identify patents to shed or sell.
Corporate sources explain that the traditional approach of keeping a patent until it has expired has ended in many companies. Patent departments are working with smaller budgets and are committed to finding more ways to save costs and raise revenue.
A good way of achieving that aim, they say, is by abandoning less valuable patents or registrations for inventions that were never commercialised to slash IP overheads – or, better yet, by selling them off.
“With an infinite budget, there would be no need to abandon a patent,” notes Rob Mann, head of IP at Cambridge-based company Pragmatic, adding that that is rarely the case for patent departments.
He adds that with limited resources, in-house counsel should perform routine reviews of their portfolios and decide which patents are worth keeping and which should be cast asunder.
Claude Kaplan, head of IP commercialisation at Benchmark Holdings in London, agrees with this point, and adds that his company reviews every patent according to its current status and lifetime cost. Each patent is scored by three different criteria sets; patent strength, commercial potential and overall cost.
“With some patents costing hundreds of thousands of pounds over the course of their lifetime, it is very important to regularly examine a company’s IP,” he says.
“You don’t want to sell something that allows other players to compete with you on the market. That would leave egg on your face"
But working out the right criteria is hard – particularly for large businesses with different protection needs. Stephan Wolke, head of IP and services at steel and engineering company Thyssenkrupp in Germany, says he holds a yearly meeting with the head of sales and R&D to go through each portfolio and ask what is needed and in which country.
He notes that enforceability is a key factor in deciding which patents to keep. “If a patent cannot be enforced in a certain jurisdiction, there is no point holding on to it,” he says.
“Do we have the registration in a country where we might want to go to court and don’t see a chance of winning? In such cases it is better to forgo the patent than use money and brain power on a battle you cannot win.” Patent detectability plays another important part of whether or not to maintain a patent for Wolke, because there is little point in keeping a registration if the business cannot tell when it is being infringed.
Patent money
Sources point out that it is obviously preferable to sell a patent rather than abandon it, which is why the trend is to sell or licence a patent that is no longer needed by a company. By licensing a patent, a business can make up for the cost of maintaining it.
However, two problems can arise from licensing rights. Firstly, the IP team would have to take the time and energy to find a licensee. Secondly, it is important to find one that doesn’t pose too much of a risk.
“You don’t want to sell something that allows other players to compete with you on the market,” says Kaplan at Benchmark. “That would leave egg on your face.”
Freedom to operate can be another concern, note in-house counsel, because by selling a patent to a competitor, a company could corner itself out of the market.
Sources explain that it is important to keep track of when portfolios were last reviewed. Companies with extensive IP portfolios will have elaborate databases covering when a patent was last reviewed and which future products it should cover.
“The database must be systemised and organised, otherwise you’re just spending money on something no longer needed,” advises Mann at Pragmatic. He adds that a good IP catalogue should be in sync with product development. Any dead weight that no longer contributes to product advancement should be revisited. Something so simple as adding a note as to when a patent was last reviewed could help future IP teams decide when, or if, to abandon the registration.
Risky abandonment
Beyond selling patents to the wrong business, there are considerable risks when it comes to shedding patents that businesses must be careful to avoid.
Sources say that damaging the relationship with the inventor is cited as one of the biggest risks of abandoning a patent. Doing this can send a negative signal that a company doesn’t value an inventor’s research.
“You don’t want to hurt the self-esteem of the inventor because you are saying their life’s work may not be worth a patent,” says Kaplan at Benchmark. “It is important to remember that in some jurisdictions, the patent rights automatically return to the inventor or university that created the technology.”
Another risk is having a competitor jump in on an important piece of technology because the business abandoned the patent too early. Mann at Pragmatic notes: “For all companies, you file a patent because it is a good idea at the time. But if you decide you are going a different route the patent could be used by someone else so you have to pick and choose wisely.”
The opportunity loss that may result from getting rid of a patent is another important consideration. According to Kaplan, shedding a registration too early could mean losing a competitive advantage.
“It’s a very negative signal to the external market to abandon a patent,” he says.
It is easy to draft a patent for the landscape of the day. But with the pace of technology accelerating in unpredictable ways, IP lawyers need to project themselves into the future to imagine the world at the end of a patent’s life before deciding to let it go.
Expected future costs and a sharp understanding of the evolution of the market are important considerations to be made before letting go of a patent.
