Caring for Your Patent Garden During Economic Winter

January 2011

Much like a garden endures a harsh winter to be rejuvenated when spring returns, a properly tended patent portfolio can survive economic frost to flourish under more favorable conditions. During times of fiscal stress it may be tempting to sacrifice patent protection to conserve resources. However, patent decision-makers must think carefully about available options, as ill-considered decisions can be costly. Below are a few tips to assist companies in making decisions that will benefit them both now and when economic sunshine returns.

Conduct an Audit of Your Patent Portfolio

The ability to make strategic IP decisions is predicated on a working knowledge of the scope and content of the company’s patent portfolio. Nonetheless, it is surprising how many patents and patent applications continue to be maintained or pursued without a clear vision of how each fits the strategic goals of the company.

Develop or obtain a comprehensive list of owned or in-licensed patents and patent applications; review the specification and claims of each. Classify each patent or application as pertaining to a particular product or service of the company. Note whether the patent or application covers the company’s own products or services, whether it derives its value primarily by keeping competitors from readily designing competing products or services, or both. Review not only the claims but also the specification; some patent applications may disclose subject matter that is not currently being pursued but is nonetheless of strategic importance. Identify cases that no longer fit a strategic purpose, perhaps because they cover superseded technologies or areas of research that the company is no longer pursuing, or because the application was filed in a country that is no longer relevant to the company’s business. Cases designated as “non-core” may be considered for out-licensing as described below, or may simply be abandoned to focus resources on core areas. This process may be equally useful to evaluate other IP assets.

Look for Opportunities to Monetize Non-Core Patent Properties

Consider ways in which income may be derived from non-core properties that are not of use to your company but may be useful to others. Examine whether the technology could be developed into a platform technology, or shifted into different areas with similar functional requirements. Conduct searches to identify companies with a focus in these non-core areas and/or to identify potential or current infringers. During economic downturns, both the patent holder and the potential infringer may be more inclined to agree to modest license terms, the alleged infringer to avoid expensive litigation and the patent holder to generate income from its IP.

Once a pool of potential targets is identified, a systematic campaign may be instituted to out-license the properties or perhaps collaborate on new projects or ventures. Alternatively, outright sale of non-core assets may be an option. Many patent auction companies, tech fair avenues and private consultants exist to match buyers and sellers of patents. Be cautioned, however, that the process may take longer than expected and net less revenue than projected.

Create a Budget That Identifies Timing and Magnitude of Expenses

A key element of the patent decision-making process is an understanding of the cost and timing of various decisions. It is undisputed that obtaining a patent is an expensive process in the U.S., let alone in foreign countries. However, the most significant costs generally occur at three times – preparation and filing of the application, replies during prosecution, and annuities/maintenance fees. These events can occur months, even years, apart. Certainly there are additional routine costs which arise during the intervening periods, but many of them can be deferred if necessary and are typically comparatively small. Thus it can be helpful to project when significant expenses will be incurred. Patent applications that might be allowed to lapse if significant fees are due imminently may be left in a holding pattern if such expenses aren’t due for months or years down the road. These applications can be reassessed at the time the fees come due, as priorities, financial constraints, and business goals may change in the interim.

Consider Timing Issues as Part of Business Strategy

Many procedural avenues are available to accelerate or slow the patent process and corresponding costs. For example, the most significant expenses associated with pursuing foreign patent protection in many countries can be significantly delayed by filing an initial international application which serves as a place holder for member countries for up to 30 months or more from the priority date. In addition, some countries allow the patent applicant to defer examination for several years after filing, thereby postponing examination fees and the costs associated with reviewing and responding to substantive actions.

On the other hand, some countries have options for accelerating examination, although the cost and procedural requirements vary greatly among countries. Increased availability of so-called “patent prosecution highways” between partner countries, which provide for expedited examination in one country of claims that have been allowed in the partner country, may also reduce the time from filing to patent grant.

Accordingly it is important to consider the business strategy for each filing. Is the filing intended to protect a product or process that will be commercially marketed in the near term, particularly in quickly changing technology sectors? If so, expedited examination and grant may be desirable and merit expending increased resources. On the other hand, is the filing based on early stage research that may change or develop before marketing? Or is the filing intended to maintain a pending patent position to allow the presentation of claims that cover a competitor’s activities as they progress or attempt to design around your existing patent protection? In these circumstances, it may be beneficial to take advantage of available extension and delay mechanisms and postpone costs.

Improve Internal Procedures

Inefficient internal systems are a frequent culprit in causing unnecessary patent costs and delays, including extensions and related fees. Relevant systems include processes for soliciting input from key members of the business and scientific teams. It is worthwhile to establish or reevaluate processes for capturing and assessing new developments stemming from the company’s research and development or other unexpected avenues. Make sure that basic invention disclosure forms are readily available to all and that the process for submitting these forms is simple. Incentive programs can be useful tools to encourage participation and continued creativity. Rewards need not be extravagant; most studies show that public recognition is an excellent motivator. In addition, submitted disclosures should be reviewed promptly to determine how the IP fits with the business strategy of the company, and filing decisions should be communicated to the submitters.

It is also important to have procedures for obtaining signatures on necessary documents (IP policies, declarations, assignments, etc.) and to maintain current contact info for employees who have left the company to facilitate communication as needed. Notebook records of innovation should be routinely audited to ensure that best practices are followed, and the records should be periodically archived for ease of recovery if needed. Procedures for capturing prior art knowledge of involved individuals to facilitate compliance with disclosure requirements of various patent offices should also be established.

Finally, if the company utilizes outside patent counsel, it is important to establish preferred procedures for directing correspondence, determining strategy, and communicating decisions. For example, consider whether complete files will be maintained by the company or only by outside counsel. It is also advisable to establish procedures for reviewing drafts and communicating strategic goals. Most attorneys are willing to have a discussion regarding operational procedures and preferences off the clock. In addition, keeping outside counsel in the loop with regard to business decisions and changing priorities is important; otherwise you may find you are pursuing patent claims in a manner inconsistent with the goals of the business.

With a little attention, some light pruning and a bit of planning, your company’s patent garden will emerge from winter with stronger blooms, less dead foliage, and even healthy new growth, well-positioned to flourish for years to come.

If you would like to discuss your patent portfolio strategies, please feel free to contact Lisa M. Treannie .

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