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FOCUS Security Creating value through patents

In a paper given at the recent AWA Security Conference, Mark Miller and Devan V. Padmanabhan discussed how intellectual property (IP) creates value for converters

Let’s consider a tamper evident tape developed by a company that understands coating fluids

onto substrates but has little knowledge of the raw film business. In the converting industry, engineers and scientists group technology into product or process technology; the legal equivalents are utility and method patents. For example, with the tamper evident tape, if a new adhesive is developed that holds it to a package with an unexpected strength, a product (utility) patent could be applied to the invention of the chemistry involved. In addition, if the multilayer film can

survive a traditional roll-to-roll process with all the bends and twists without delaminating then a process (method) patent could be applied to the invention of the process of making or handling the film. Once the new invention shows technical

merit, working with a patent attorney will help provide the path to most value for the technology. Involving a patent attorney as a business partner early in the product or process development phase will allow the newly acquired property to be handled with the most care and create the most power in future transactions with the property.

Increasing technology value With a patent attorney as a business partner helping you maneuver the minefield that is the intellectual property (IP) landscape you will be able to assess what moves will add value to your patent portfolio. From blocking out competitors to maintaining a monopoly in the marketplace, the possibilities to increase the value of the technology are varied. Potential pitfalls of portfolio strategy management include failure to pursue patent protection strategically with business goals in mind or to use patents effectively to meet business goals; and ineffective monetising of patents due to lack of legal counsel along the timeline of patent protection. For example, if a new adhesive chemistry is developed for the tamper evident tape but the focus of the patent claims are too narrow then your competition can work around the scope of the IP. Whether the business goals include direct

use of the patented technology, licensing the technology to others or litigation to enforce

18 October 2012

From left: Mark Miller and Devan VPadmanabhan

patent rights, the effective use of a company’s patent portfolio is the key to creating value with technology. Patents are a powerful tool that can exclude competition from the marketplace by creating a legal monopoly for your product or process for 20 years. IP management is a long term plan and

patent portfolio strategy for maximising ROI requires a long term strategy. Patents typically require 3-5 years to obtain and even then it may take a few years to fully monetise. Thus, if you have a short term focus you may undervalue your patent portfolio. This may sound familiar to engineers indoctrinated in the Six Sigma methodology. Where many companies look at short term gains, patent portfolio strategy and Six Sigma looks at the return on investment over years and only after milestones have been reached and realistic time lines have occurred.

Core patents Not all patents directly realise revenue. A relatively small number are ‘core’ patents that directly protect a product or lead to the realisation of royalties or other revenue. Many more patents may not directly result

in revenue but may nevertheless have value in supporting the ‘core’ patents. Other patents may have little or no value to the company that owns them because they are unrelated to the business. In our example of a tamper evident tape that was developed by a company that understands coating fluids onto substrates but has little knowledge of the raw film business, the ‘core’ patent would be associated with coating technology but not new film substrates. Core patents are like the core technology of a business: it is the technology that spans multiple product lines just as an adhesive that bonds well to a package can create new tamper evident tapes and box sealing tapes. Non-core technologies in our example would include the delamination resistant film which could be licensed to restricted vendors. A patent on a multilayer film may have no value to a coating company, lending itself to a sale of the IP to a film vendor. All examples create revenue but some are more direct than others. We now know that there are many ways

to make money on your IP just as you could on capital equipment property. You can chose to use it directly, contract the use out to others (even a competitor) or sell it on the open market. But what is the best way to maximise your return on investment? There are two tacks you should consider: patent prosecution and monetising your portfolio.

Maximising ROI Companies should always be aware of business goals when developing a patent portfolio. What is the core technology focus? What do you want to produce? What value statement does the company bring to the market? Without such focus the company may be unable to maximise ROI. The company may pursue patents of little or no value or forgo patent protection for alternative products or potential improvements. Forgoing patent protection will permit competitors to design around core patents and threaten product lines. To maximise the value of a patent portfolio you need to include patent attorneys or agents in the research and development process. Think of a patent attorney as a business partner. Ensure that the research and development team including market researchers are included in

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