Your SlideShare is downloading. ×
0
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
What every ceo needs know about patents
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

What every ceo needs know about patents

634

Published on

Extended version of presentation to the IEEE Boston Entrepreneurs Network

Extended version of presentation to the IEEE Boston Entrepreneurs Network

Published in: Business
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
634
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
18
Comments
0
Likes
2
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. What Every CEO Needs To Know About The Value Of Patents Extended Version 2/22/2008 Robert P. Weber Managing Director Patent Kinetics, LLC www.PatentKinetics.comAn earlier, condensed version was presented at the December 4, 2007meeting of the IEEE Boston Entrepreneurs’ Network Copyright (c) 2007-2008 Patent Kinetics, LLC
  • 2. Notices and Disclaimers Patent Kinetics, LLC is a patent and domain name broker. See www.patentkinetics.com for more information Bob Weber, its Managing Director, is not an attorney Nothing in this presentation or related remarks tonight constitutes, or shall be construed as, the giving of legal advice and/or the practice of the Law Copyright (c) 2007-2008 Patent Kinetics, LLC 2
  • 3. Surprise! MOST PATENTS ARE WORTHLESS! Copyright (c) 2007-2008 Patent Kinetics, LLC 4
  • 4. Survival Analysis:Most Patents Are Worthless! Half (54%) of patentees allow their patents to expire early through failure to pay maintenance fees Expiration reflects a judgment by the patent owner that the patent has little or no value The Patent Paradox: Why do CEOs continue to invest resources in patent-related activities if so few patents have any real value? Copyright (c) 2007-2008 Patent Kinetics, LLC 5
  • 5. US Utility Patents Granted 1963-2005By US/Foreign Assignee 180,000 US Foreign 160,000 Patents Granted 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1963 1973 1983 1993 2003 Copyright (c) 2007-2008 Patent Kinetics, LLC 6
  • 6. Per Cent US / Foreign Utility Patents Issued1963-2005 US Foreign 100% 80% Per Cent Utility Granted 60% 40% 20% 0% 1963 1973 1983 1993 2003 Copyright (c) 2007-2008 Patent Kinetics, LLC 7
  • 7. US Utility Applications 1963-2005By US / Foreign Applicant 400,000 US Foreign 350,000 300,000 Utility Applications 250,000 200,000 150,000 100,000 50,000 0 1963 1973 1983 1993 2003 Copyright (c) 2007-2008 Patent Kinetics, LLC 8
  • 8. Per Cent US/Foreign Applications1963-2005 – USPTO Data US Foreign 100% 80%Percent Applications 60% 40% 20% 0% 1963 1973 1983 1993 2003 Copyright (c) 2007-2008 Patent Kinetics, LLC 9
  • 9. US R&D and Patenting Kept Pace Since Late1970s (BHall,2004) Copyright (c) 2007-2008 Patent Kinetics, LLC 10
  • 10. Per Cent of Patents Expiring By Class of Patentee / Assignee (Moore, 2005) Fewer Unexpired Expired in Expired in Expired in ExpiredExpired Patents 12 Years 8 Years 4 years Patents US Corporation 51.5% 16.2% 19.7% 12.7% 48.5% Foreign Corporation 48.7% 18.3% 19.7% 13.3% 51.3% Foreign Government 37.7% 15.9% 29.0% 17.4% 62.3% US Individual 34.2% 13.8% 26.9% 25.1% 65.8% Un-Assigned 31.9% 14.5% 24.8% 28.8% 68.1% Foreign Individual 29.8% 17.2% 26.2% 26.9% 70.2% US Government 25.4% 13.6% 43.0% 18.1% 74.6% MoreExpired Conclusion: Domestic and foreign corporations least likely to let patents expire prematurely Copyright (c) 2007-2008 Patent Kinetics, LLC 11
  • 11. Expiration By Broad Tech Class (Moore 2005) 60% 50% Expiration % 40% 30% 20% 10% 0% Chem CnC DnM EnE Mech Other Industry Segment Chem – Chemistry CnC – Communications & Computer DnM – Drug & Medical EnE – Electrical & Electronics Mech – Mechanical Copyright (c) 2007-2008 Patent Kinetics, LLC 12
  • 12. Findings by Industry Communication and computer, drug and medical, electrical and electronics patents were all more likely to be maintained Mechanical patents and patents in the catch-all “Other” category were more likely to expire. Chemical patents seemed to fall more towards the middle. Copyright (c) 2007-2008 Patent Kinetics, LLC 13
  • 13. Questions: Patent Paradox: if most patents have little or no Paradox expected economic value, why do individuals and corporations patent so heavily? What factors contribute to the judgment of worthlessness? What makes patents valuable? How are patents valued? Copyright (c) 2007-2008 Patent Kinetics, LLC 14
  • 14. Some Theories of Patent Value Treating patents as the “underlying” for an option, as in Black-Scholes option pricing (e.g., Torres@Consor) – Probably doesn’t work well since the distribution of value does not conform to the standard “bell curve” distribution – Might conform to Poisson distributions or others used to characterize infrequent events (e.g., few very valuable patents) Mathematical prediction formulas (regression) using based on patent Survival Analysis – This method deals with the average, the common, the ordinary – Still, informative as factors to consider for evaluation What’s it worth in litigation, a/k/a How Big Is The Target? Copyright (c) 2007-2008 Patent Kinetics, LLC 15
  • 15. Survival Analysis: Compared With ExpiredPatents, Unexpired PatentsMoore (2005) Had more claims – More inventions Cited more US patent prior art references – Less vulnerable if litigated Received more citations by subsequent patents – Judged important by others Listed more inventors – May indicate more resources invested Had more related applications – Part of a broader patent portfolio Copyright (c) 2007-2008 Patent Kinetics, LLC 16
  • 16. Where’s The Value? Value is most often derived from an extensive and growing patent portfolio Portfolios improve scale and diversity – Broader coverage – More to (cross-) license – More likely to succeed in litigation Current environment requires high volume, portfolio approach – Broad portfolios are the best defense against competitors armed with patents MAD – Mutually Assured Destruction Cross-licensing In some circumstances, patent assertion has become a way to monetize the investments in IP Copyright (c) 2007-2008 Patent Kinetics, LLC 17
  • 17. “Super-patents” –A Collection Of Related Patents (Parchomovosky &Wagner) Advantages include: – Eases subsequent in-house innovation – Attracts related external innovations – Avoids costly litigation – Improves bargaining position – Improves defensive positions – Enhances efforts to attract capital – Expands the freedom of research inquiry – Addresses uncertainty related to future market conditions and competitors – Addresses uncertainty in the patent law – May lay a foundation for patent assertion Copyright (c) 2007-2008 Patent Kinetics, LLC 18
  • 18. Building Portfolios Of Related PatentsTypically Leads To Greater Value Develop inventions in-house – Develop, implement, and evolve a patent strategy – Manage innovation Outsource innovation but retain ownership – Some firms can do it better for a price The M/A route – Some companies have been acquired mainly for their IP Acquire portfolios – From owners – Through brokers, auctions, etc. Copyright (c) 2007-2008 Patent Kinetics, LLC 19
  • 19. Where Individual Inventors Go Wrong Inventors substantially overestimate the value of their patent(s) and/or pending applications Although there is no obligation to search, many fail to locate prior art that should be cited – Negates the longer term value of their efforts Not able to leverage guidance from patent counsel – Short sighted, economically constrained – Unwilling and/or unable to expand team – Make common mistakes despite guidance Copyright (c) 2007-2008 Patent Kinetics, LLC 20
  • 20. Common Mistakes Publish results or details prior to filing Publicly offer for sale too soon Disclose details to investors before filing without NDA Use resources of their employer to develop inventions Have duty to assign to employer with no carve-outs (CA a bit different) Incorporate claim elements suggested by individuals not named as inventors Copyright (c) 2007-2008 Patent Kinetics, LLC 21
  • 21. Conclusions Most patents are worthless Building portfolios of related patents typically leads to greater value – Develop inventions in-house – Outsource innovation but retain ownership – Acquire companies / portfolios Patent owners should consider assertion as part of their overall strategy for monetizing their investments Copyright (c) 2007-2008 Patent Kinetics, LLC 22
  • 22. Patent Kinetics Assists Patent Owners By Evaluating potential for – Commercialization – Licensing – Sale – Assertion Portfolio Triage – The Good, The Bad, and the Ugly – The Valuable, the Worthless, and the Enhanceable Brokering relationships / deals with licensees, acquirers, and patent assertion firms Copyright (c) 2007-2008 Patent Kinetics, LLC 23
  • 23. Contact Information Robert P. Weber Managing Director Patent Kinetics, LLC Skype: BobWeberBOS Info@PatentKinetics.com www.PatentKinetics.com Copyright (c) 2007-2008 Patent Kinetics, LLC 24

×