Patent Portfolio Management

1. Patent Portfolio Management By: Michael A. Leonard II

2. Definition • Patent portfolio management refers to the practice of determining what to patent, how to proceed during the patent application drafting and prosecution process, and how the patent is eventually used by a company

3. Goals • A patent portfolio management strategy should accomplish three goals: • Determine what inventions should be patented; • Determine how patent applications should be drafted and prosecuted; and • Determine how patents should be used and whether they should be monetized

4. Determining Patent-Worthy Inventions • Determining what inventions should be patented requires, first and foremost, that an organization identify what potentially patentable technology the company has developed • The value of various technologies is highly industry-specific • It is beneficial for patent professionals to work closely with engineers and scientists to determine which technologies exist within a company

5. Incentivizing Engineers and Scientists to Disclose Inventions • In a large corporation, it may be difficult for a relatively small number of patent professionals to be aware of all of the new technologies being developed within the corporation • An effective way to encourage disclosure is to offer inventors a financial incentive for disclosing inventions; for instance, perhaps the corporation may choose to offer inventors $1,000 for disclosing an invention and participating in the patent drafting process where a patent application pertaining to the invention is later filed

6. Offensive v. Defensive Patents • Patents may be valuable for both offensive and defensive purposes • Patents used offensively may result in licensing revenue and, sometimes, in damages awards from litigation • Patents used defensively may make it less attractive for a competitor to sue; for instance, if you infringe a competitor’s patents and they also infringe yours, litigation may result in a “war of attrition” where both sides would spend a large amount on legal fees and realize a small amount, if any, in monetary damages • It may also be useful for marketing purposes to have a large patent portfolio (“portfolio padding”) so a corporation can claim that it is more innovative than its competitors in a given market, although the actual value of this approach is difficult to determine • Most patents are used defensively or for portfolio padding

7. Determining Whether to File • In order to determine whether to file a patent application, it may be beneficial for patent professionals to consult engineers and to conduct a brief patentability search to determine the state of the art • If the art is crowded and/or the invention appears to be a narrow improvement over what already exists, filing may not be beneficial • It may also be beneficial to consider whether it appears likely that a competitor uses the technology, or may use the technology in the future • The potential value of a patent to be monetized (if a patent is to be used offensively) is difficult to determine, but may be assisted by knowledge of a competitor’s products using the technology (perhaps sales multiplied by a licensing rate of 5%; the many licensing strategies for determining patent value are beyond the scope of this presentation) or, in standards-rich industries such as telecom, adoption of the technology in a standard increases the value for licensing • Another consideration is how difficult it is to detect infringement

8. Application Drafting Strategies • Due to the difficulty in determining the potential value of a patent, it is generally beneficial to draft every patent application properly and not cut too many corners to save cost • Spending more money on the front-end to develop a well-written, thorough patent application with a good set of claims directed to one invention at a time (for disclosures having multiple inventions, multiple continuations may be filed, leading to extra fees) can save money during the patent prosecution process by increasing the Examiner’s understanding of the invention and reducing non-art-based objections and rejections, such as those under 35 U.S.C. § 101 and § 112 • Including the inventors in the process may significantly increase the quality and accuracy of the disclosure

9. Patent Prosecution • During patent prosecution, it may be beneficial to conduct personal Examiner Interviews after the first Office Action to ensure that the Examiner understands the invention and the art • Personal Examiner Interviews, while more expensive, tend to be more beneficial in the long run due to the ability to show the Examiner figures and text, as well as the ability to gauge how cooperative the Examiner may be from body language; it is also more difficult (although certainly not impossible) for one party to remain committed to flawed reasoning in the physical presence of the other party • This can further reduce prosecution iterations, lower the cost of patent prosecution and obtain allowances more quickly

10. Appeals • Appeals can be an effective tool where Applicants believe an Examiner is incorrect, but the Examiner will not budge from his or her position • While appeals are more expensive than filing Responses, this may be more cost effective in the long run than continuing fruitless prosecution before the Examiner • Where “clear error” exists in the rejections, a Pre-Appeal Brief Request for Review can be a cheaper way to overcome the rejections and obtain a new Office Action or Notice of Allowance

11. Managing Maintenance Fees • Once an application has issued as a patent, the value of the patent should again be considered each time a maintenance fee is due • Maintenance fees start lower and become progressively higher as more time passes; the first maintenance fee due at 3.5 years is $980, the second maintenance fee due at 7.5 years is $2,480 and the third maintenance fee due at 11.5 years is $4,110 • Naturally, if a patent generates more in licensing revenue than the cost of the maintenance fees, these fees should be paid • Where a patent is used defensively or for portfolio padding, it should be examined at 7.5 and especially 11.5 years whether competitors use the technology

12. Patent Renewal Rates Source: PatentlyO (http://www.patentlyo.com/patent/2010/02/uspto-budget-shortfall-causes-maintenance-fees.html?cid=6a00d8341c588553ef01287773c61d970c)

13. Determining Infringement • Especially for offensive patents, it is beneficial to consider how easily infringement can be detected • If infringement is readily detectable, it may be beneficial to monitor competitors to determine whether licensing revenue can be obtained • A reasonable licensing royalty can help to avoid litigation and encourage competitors to quickly agree to license the technology

14. Reexamination • Recently, as a defensive measure, some large companies have started monitoring the patents issued to competitors and, especially, those obtained by “patent trolls” • Where a patent issues having claims that appear to read on a company’s product, it may be beneficial to push the patent into reexamination if art exists that is believed to teach the claimed features • Courts may not grant a stay of litigation until reexamination proceedings are concluded • A risk of reexamination is that if the patent survives, the presumed validity of the patent will likely be strengthened

15. Conclusion • Patent portfolio management is highly industry-specific and requires expertise and careful management in the company • A strong strategy can mitigate expensive litigation and, in certain cases such as with IBM and Texas Instruments, can result in a licensing revenue stream that generates significant revenue for the corporation