Patent Citation and the Economic Value of a Patent

1. Patent Citation and the Economic Value of a Patent Gerald J. Siuta, Ph.D. President Siuta Consulting, Inc. (www.siutaconsulting.com) Workshop on Competitiveness of Technology Innovation and Research Achievements Taipei, Taiwan September 22, 2004

2. Presentation Outline • Patent and Licensing Statistics • AUTM 2002 Licensing Survey • Patent Citation • How can it assist in patent valuation • Economic Value of a Patent • Technology Valuation • Financial Value of a Patent Siuta Consulting, Inc.

3. Why file a patent application? Siuta Consulting, Inc.

4. Academic Technology Transfer in North America 1991-2002 AUTM Licensing Survey: FY2002 Siuta Consulting, Inc.

5. What is a Patent? Siuta Consulting, Inc.

6. Common misconception: A patent provides the inventor the right to make, use and sell the invention Siuta Consulting, Inc.

7. A patent for an invention is the grant of a property right to the inventor(s). The right conferred by the patent grant is “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States or “importing” the invention into the United States United States Patent and Trademark Office 2004 Siuta Consulting, Inc.

8. What is patent citation? Siuta Consulting, Inc.

9. Patent Citation • Also called a “Patent Reference” • A list of earlier issued patents that appears in the citing patent when it issues • Considered to be the most relevant prior art upon which the citing patent is based • Establishes novelty of the citing patent • Assesses impact of the technology Siuta Consulting, Inc.

10. When Citing Another Patent • References previous patents in the same technological area as the citing patent • The cited patents represent the most relevant prior art to the invention • Provides a view of previous technology that forms the basis for the citing invention • The cited company may be a potential licensing partner Siuta Consulting, Inc.

11. When a Patent is Cited • The citing patent is related to the cited patent with respect to the subject matter • Citation may indicate patent infringement • Establishes the cited patent’s impact on subsequent inventions • Highly cited patents are considered to be more valuable • High valuation is placed on companies that hold very highly cited patents Siuta Consulting, Inc.

12. Siuta Consulting, Inc.

13. Patent Citation Services • Derwent Patent Citation Index • library.dialog.com/bluesheets/html/bl0342.html • Metrics Group (EKMS, Inc.) • www.patentcitations.com • Mogee Research & Analysis, LLC • www.mogee.com/profile/profile.html • Wisdomain, Inc. • www.wisdomain.com/CitationModule.htm Siuta Consulting, Inc.

14. Patent citation provides a means to determine the value of an issued patent Siuta Consulting, Inc.

15. Economic Value of Patent • Confers the right to prohibit others from making, using and selling the invention • Protects an investment in the invention • A company is more inclined to develop a product with the assurance of being able to prevent others from using the invention • Limits the risk of developing new products by guaranteeing the patent holder a competition-free head start to make a profit Siuta Consulting, Inc.

16. A patent (or patent application) has little economic value unless a company is willing to invest in the commercial exploitation of the technology Siuta Consulting, Inc.

17. Since most technologies are licensed and/or start being developed long before the patent issues, patent citation provides limited utility in determining the value of a novel technology Siuta Consulting, Inc.

18. Therefore, the key is the value of the technology Siuta Consulting, Inc.

19. Technology Valuation • What is the technology • How will it be used • Is there a potential product • Is the product novel • An improvement to a marketed product • Is there a market for such a product • What are the competitive products • Time and cost to develop the product Siuta Consulting, Inc.

20. Is there a formula to determine the financial value of a patent? Siuta Consulting, Inc.

21. Value of a Patent • License Term: • The obligation to pay royalties with respect to net sales of the Product shall commence on the Effective Date of the License Agreement and continue until the later of (a) expiration of the last to expire patent covering such Product or (b) a period of ten (10) years from the date of first commercial sale of such Product Siuta Consulting, Inc.

22. Value of a Patent (continued) • Royalty on Net Sales: • In any country where a patent application does not issue, the royalty rate due to the Licensor will be reduced by one-half on net sales of each Product that is marketed by the Licensee or any of its sublicensees and payable for ten (10) years from the date of first commercial sale of such Product. Siuta Consulting, Inc.

23. Pitfalls to Avoid • Pursue licensing before technology is sufficiently developed • Publish before filing patent applications • File patent applications too early • Fail to file patent applications worldwide • Mistake new use for new product • Overestimate the value Siuta Consulting, Inc.

24. It’s not the patent, but rather the technology that has the real value Siuta Consulting, Inc.