PATENT STRATEGY
assume, however, that many other companies fall closer to the mobile telecoms side of
the
spectrum. A common approach to monetisation is to put patents into a pool with other companies. In a pool, a company mixes its standard essential patents with those of other companies, and can even be compensated by members of the pool who have made less of a contribution. While there may be overriding business concerns for doing this, such as pushing through favourable standards, patent pools are only an incremental change from the portfolio-wide cross-licences.
Patents, by definition, are a form of legal
monopoly. When they are infringed, then someone is using a property right without permission. To obtain value from a patent, you need to exclude. Te exclusion can be absolute, or constructive, in that you can apply a cost of doing business on your competitors. If you license a patent and receive cash, it is easy to quantify the value you have received. No less important, though, is gaining a competitive advantage. If your competitor has to pay an additional $0.10/unit, then your product has a $0.10/unit advantage. Te more (legal) disadvantages you put on your competitor, the better situated your company will be.
Some companies do not wish actively to license. Tis can be an understandable business decision to avoid countersuits, or even just to keep the focus on producing a product. If that decision is made, however, then there should be no reason to keep large numbers of under-used patents in its portfolio. To maximise the value of its portfolio, the logical decision to be made is to retain a modest number of defensive patents and then to sell the rest. Ideally, the ‘modest number’ of patents retained in the company’s portfolio should be the smallest number of patents which will deter competitor lawsuits due to the fear of a countersuit.
Te business entity that buys a company’s excess patents is likely going to enforce them and obtain licences from infringers. Te net result is that a company which sells its excess patents has both increased its bottom line and its competitive position in the marketplace. Further, free-riding on the company’s innovation has stopped.
Some people might be concerned that by selling patents their companies will somehow be pulled into litigation. Tere are a few ways to minimise and mitigate this. First, have a policy that all files relating to a patent are turned over to the buyer. Better still, retain no documents pertaining to a patent that are not part of the public record. Second, insist on compensation for employee time in future litigation, and have
“THE ‘MODEST NUMBER’ OF PATENTS RETAINED IN THE COMPANY’S PORTFOLIO SHOULD BE THE SMALLEST NUMBER WHICH WILL DETER COMPETITOR LAWSUITS DUE TO THE FEAR OF A COUNTERSUIT.”
irrevocably damaged by the new patent owner. Te patent could be held invalid or unenforceable and the grant-back rights could be rendered useless. While this could happen, it should not be viewed as a risk so much as an opportunity to let someone else test the strength of your patent using their money. Any patent buyer will be motivated to keep the patent from being invalidated, and they are as likely to do as good a job as you in keeping that from happening. In any event, if the patent does end up becoming invalid or unenforceable, it is better to know prior to having relied on it yourself.
Additionally, the marketplace for patents is
bigger than ever before and continues to grow. Tis works to your advantage in selling patents, but if you happen to find that you have sold too many, then it is likely that you can buy patents yourself when you need to. So instead of holding on to too many patents to cover all eventualities, you can obtain patents when you need to as the situation arises.
Ultimately, patents have an expiry date. If patents are not used during their effective lifetime, they are a wasted asset. Ideally, your patent provides you with both a sword and a shield with respect to your competitors. .
Brad Close is the senior vice president of transactions at Transpacific IP. He can be contacted at
brad.close@
transpacificip.com
this compensation run with any transfer of patent rights. Tird, do not try and retain any decision making rights on how the patents are handled post-sale. It is unlikely that any savvy patent buyer would allow this in any event, but when you are uninvolved with the patent buyer, you will not be pulled into the suit as an essential party to the litigation.
Tis scenario might seem over-simplified, since there is the task of determining what the minimal number of retained defensive patents should be. What you can do here is actually sell more patents than might be prudent, but retain rights on some of those patents to license to specific companies. Tis is actually a more strategically sound choice, since you can tailor your portfolio to be stronger against your more threatening competitors. Terefore it is possible, for instance, to sell 90 percent of your portfolio, but retain 30 percent of it by way of a grant-back licence to retaliate against specific concerns.
One concern with selling a patent with grant- back licences is that
the patents could be 58 World Intellectual Property Review September/October 2013
www.worldipreview.com
Brad Close is a US patent attorney. He graduated from Franklin Pierce Law Center with a Juris Doctor and Master’s of IP. He has prosecuted patents before the USPTO, licensed patents, and brokered multimillion dollar patent sales.
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