When to let go

Deciding whether to abandon a patent can be a tough call, Anaqua’s Mike Caldwell provides some tips to ensure your business makes the right decision

Friday, May 5, 2017
IP Magazine

By Mike Caldwell, Director of Business Development at Anaqua Inc.

In business, as in life, knowing when to let go can be a tough decision. This is especially true for corporations looking to maximize the return on investment in their intellectual property (“IP”), specifically, deciding which IP assets to keep and which to divest or abandon.

Well-designed and managed portfolio reviews allow executives to align the company’s IP assets with larger corporate objectives. After all, patents exist for three principal reasons: 1) to protect products and product roadmaps, 2) establish a defensive position to ensure freedom to operate, and 3) directly monetise assets and provide income for the company. With these three objectives in mind, almost every patent management task becomes clear.

Answer the important questions, “Why do we own this patent?” or “Why are we investing in prosecuting this application?” Companies that are unable to answer these questions lack the basic guidance needed to manage their portfolio effectively. There should be a defensible motive highlighting one of the three reasons mentioned above for every patent and pending application in an IP portfolio:

• Does it defend against competitors?

• Does it offset a cross-licensing agreement or allow extraction of a competitor’s patented technology?

• Does it, or can it, make money? and

• If the answer is no, or I don’t know, rethink the patent.

Data-driven insight into the relative performance of each patent ensures better decision-making. Maintaining valuable patents, while pruning or divesting others that don’t fit within this framework, provides the opportunity to redirect budget to R&D and prosecuting new applications that align with corporate objectives. Today, abandoning or divesting patents without running them through a thorough review encompassing the following three principals is flatly reckless.

Know yourself

Making better portfolio management decisions begins with “knowing thyself”. That is, be certain to know exactly what patents you own and when renewal fees are due.

When was the last time you undertook a complete audit of your portfolio? How thorough was it? If an audit is too top-level, you can overlook key data and make bad assumptions about the true value of a given asset. Understanding the entire prosecution history of a patent can inform you of the true expiration date. For instance, in some cases, a patent may be subject to a terminal disclaimer (“TD”), a US Patent and Trademark Office (USPTO) rule that can dramatically shorten the enforceable term of a patent. A patent attorney may submit a TD during prosecution to overcome certain rejections, but the applicant may not know about the filing. It’s easy to be unaware of a TD, especially if you don’t have a record of this action, changed your IP law firm recently, or bought the IP. Lack of insight can easily translate into lack of understanding about actual expiration dates that can lead to negative results such as loss of coverage. Further, with stagnant IP budgets, renewing a patent that expires soon may prove a waste of money.

Another element of “knowing thyself” is having good product mapping documentation. This may seem obvious, but it can become complicated, especially where multiple patents protect various products and their components. Keeping up with this as you submit applications and have patents granted is ideal. Tracking patents and the products they protect provides better information for making your renewal decisions; otherwise, you may unknowingly abandon a patent that provides protection to an important product.

Making the decision on whether to abandon a patent can sometimes feel more like a judgement call than a decision grounded in facts, which is hard, particularly when you have to explain and justify each decision. The decision process can become more difficult when the list of patents is long and responsibility spans many departments – others will want to review and question the decision, and many individuals get to render an opinion but are not responsible for the cost.

You need insight, gained from real data, to help decide which renewals to pay and which patents to abandon. With a complete list of patents, knowing all of the expiration dates and your protected products, you can make better decisions.

Know your competition

In addition to “knowing thyself”, patent managers must know the competition equally as well. Many companies don’t know what their competition is doing in the market, what share of business they currently have, and what their performance metrics are. This kind of awareness is critical for companies to understand where they can generate new business and where they are highly competitive against other businesses.

A more powerful way to analyse a competitor is through forward rejections, which are citations that were actually a cause for rejection of a competitor’s patent application. If you don’t know your patent’s forward rejections, you may be making renewal decisions blind.

Forward rejections help you decide if having a patent is preventing a competitor from expanding into one of your product areas. Beyond competitors, others might have demonstrated an interest in the technology, investing in the same technical space with a different product purpose. If a potential buyer is not a competitor, you can monetise the patent by licensing or selling it to someone who clearly could use it.

As an example, let’s look at a patent that the evidence indicates renewal as the appropriate action. Consider patent 7,632,379 detailed in table 1.

This patent has a formidable forward rejection record. A recent study by IP lifecycle management company Anaqua identified forward rejections as being more important than just total citation count; although, citation counts do shed some additional light on the subject, primarily citations from competitors’ Information Disclosure Statements.

This citation record indicates that the patent is relevant enough that competitors are listing it. More interestingly, the increase in the most recent year is a strong indication that this technical space is seeing increased participation.

Know your market

Once you know yourself and your competitors, you must decide if your product is still relevant in today’s market. First, look at the patent to product map, and determine the magnitude of the revenue that depends upon each patent. Your priority, understandably, should be to retain the patents that are protecting the products generating significant revenue and profits.

For the remaining patents, there is a key question to ask, “Is the patent disruptive in its technical space?” The easy ones to assess are those not in a current or planned product and that have no record of impact in the technical space. However, before you make this determination, you need to define “impact”. A metric often used, though perhaps a somewhat superficial indicator is simply the forward citation record of the patent.

Time is another important factor when determining how impactful your patent can be. If you submitted your patent at least six years ago, you want to determine how relevant it is today. When using citations as a renewal metric, a number of factors become important including, rate of citations (increasing or decreasing), length of time since the last citation, and rate of application submissions in the Art class (increasing or decreasing).

If the technical market space is shrinking, and the patent has had no new citations for several years, then that is a patent to consider for abandonment. However, you also need to consider licence out deals as abandoning an asset can impact your revenue as well as your partner’s product protection.

Many of these decisions are not easy, but, when it comes to strategic IP portfolio reviews and questions of patent abandonment, knowing yourself, knowing your competition and knowing your markets, will help you in knowing when to let go.