Finding the Gems in a Mountain of Patents: Combining analytics and human intelligence to extract value from patent portfolios
Management of Intellectual Property (IP) is a complicated endeavor. In the past, IP departments focused on basic patentability and freedom-to-operate searches, employing primarily defensive IP strategies. For the leading IP strategy companies, IP is not only a defensive asset anymore. IP Portfolios are increasingly recognized as potentially potent revenue streams. In today’s business environment, it is critical that IP departments move beyond the defensive IP management approach of the past. This article will explore some drivers of the shift in IP management strategies, as well as cost effective solutions to maximize the value extracted from a patent portfolio.
The four ways IP is being used by companies
The Shift in IP Management Culture:
There can be no doubt that the landscape of IP Management is shifting substantially. The IP Department of the past was the domain of investigators, inventors, and their R&D teams. Today, the IP audience has grown to include marketing and business development professionals. The effective management of IP assets is a goal on the radar of corporate strategists, and is critical for companies in all industries to remain competitive.
Let’s explore some of the major drivers of this shift:
- Open Innovation: R&D departments are extremely expensive to maintain. In order to remain competitive in the global market, more and more companies are learning the necessity of open innovation strategies. By partnering with the owners of disruptive IP such as universities, companies can leverage the innovation while de-risking their investment. In order to implement an effective open innovation strategy, the company must have a process in place to effectively analyze IP portfolios of potential partners. Externalization comes with risk of spending resource on a great idea, that is perhaps not properly protected by patents or even worse, weak patents.
- Competitive Intelligence needs: Patents, by their very nature, are public information that could provide substantial insight into competitors’ activities and future directions. Tools and processes to monitor the intellectual property published from the labs of competitors are important to keep an edge in the market. Performing a Google search or having a Google alert is most times not good enough. Having an active monitoring of patents from competitors as well performing gap analysis is critical success factor.
- Monetization and out-licensing strategies: Patent portfolios require considerable resources to maintain. For most companies, patents are a cost center. Allowing any number of company patents to lie dormant or unused adds a burden to the company’s bottom line, while those unused patents could be transformed into a viable source of revenue. Patent licensing is an important trend, and is increasingly valuable. Ignoring this reality is a costly oversight. The ability to assess a patent portfolio intelligently and efficiently is a critical first step toward a successful out-licensing strategy.
- Mergers and Acquisitions: For the past few years, there has been a substantial boom in M&A activity across the globe. M&A activity comes hand-in-hand with the necessity to evaluate IP portfolios. As part of due diligence, companies must ascertain the quality, validity, and strength of the portfolio of the company they intend to acquire. Additionally, the strategy for management of a new, combined, and larger IP portfolio must be carefully considered.
Solutions to extract value from an IP Portfolio:
In order to implement a successful IP Monetization strategy, the IP portfolio must be thoroughly assessed and understood. To enact a strong strategy, one must understand the strength and quality of each patent, how the patents could be used, who might be interested in such uses, the value of each possible use, and of course, when the patent will lose its value. When evaluating the possible uses of your patents, it is important to consider possibilities outside of the company’s industry and originally intended uses.
There are three major types of IP analysis solutions, 1) fully automated analysis software, 2) analysis by a human expert, and 3) a combination of the above.
- Fully automated analysis software: The advantage of a fully automated software system to evaluate the monetization potential of an IP portfolio is speed. For companies with large and varied patent portfolios, some manner of automated filtering is almost certainly a necessity. A well designed software solution without human intervention will produce results quickly; however, these results will also be “dirty.” The complicated nature of patent language renders assessment and comparison of patents extremely difficult to fully automate. While automated solutions are a great first step to narrow down the number of patents to thoughtfully examine, one would be hard-pressed to find an automated solution capable of replacing thoughtful examination by a human expert.
- Analysis by a human expert: As stated above, it is nearly impossible to replace the expertise and thoughtful consideration of a human expert when analyzing the value of a patent. Still, it must be recognized that a large portfolio including thousands of patents would require an overwhelming timeline for manual analysis.
- A combination of automation and human expertise: Due to the caveats of each method described above, the most effective means of analyzing patent portfolios must be a combination of automation and manual analysis by human experts. By combining an automated method of filtering patents based on objective analytics with the care and thought of manual analysis by a human expert, a company can rest assured that the resultant monetization strategy is designed quickly without jeopardizing the quality of analysis.
In order to efficiently assess all of the above facets of an IP portfolio, the evaluator must have competency and expertise in intellectual property management, business development and negotiation, as well as scientific and technical knowledge. When selecting a solution to extract value from your company’s IP Portfolio, be sure to include individuals with substantial experience in IP Strategy and Monetization. Gone are the days when only a patent attorney would be taking decisions about the patent portfolio. This approach is not only critical for large corporations with huge patent portfolios, it is equally true for small to medium sized companies (SME).
In case of SMEs, a substantial portion of their cash flow could be generated from patent licensing without shifting the course of their product development. In case of large organizations like Microsoft, IBM, Philips, HP and Technicolor, a significant portion of their revenues and profit are from pure patent licensing.