Determining Patent Quality for Patent Licensing and Acquisitions
Intellectual property is disembodied which makes it difficult to value. Patents are composite and thus they are one of the few exceptions to competition laws worldwide. They can be extremely powerful, both as an offensive weapon and defensive shield against competitors. Patents are complicated because firstly, the market for legal services is very competitive. Stiff competition benefits inventors through greater choice and lower prices. The price of patent preparation and prosecution services has been constant for decades. Secondly, at the same time, Patent Offices and Courts are securing the requirements to get broad patents. International coherence has also raised the bar to a great extent.
How do you measure the quality of a patent? Questions like these are most relevant to the businesses that have suffered years of litigation involving questionable internet and telecom patents. A patent must survive the challenges that await it. Patents are quite often challenged and tested during different stages in an enterprise.
Licensing - The process of patent licensing includes a patent holder that legally allows another party to sell, import, or use his invention for a particular period of time in a particular geographical region and in return for a license fee. A license is a written contract and may include whatever provisions the parties agree upon, including the payment of fees whether one time or royalties. The patent licensee is likely to conduct prior research and test the patents to see whether the claims are patentable.
Investment - Investors generally are interested in knowing whether the company has patented its inventions or not. Substantial investors would want assurances that the company’s patents will survive and effectively protect the business.
Acquisition - The owners may attempt to sell their business as their business grows manifold. The buyer will perform his research to ensure that the patents are well-written, protect their business, and will survive if challenged.
Assertion - A company may be forced to sue to enforce their rights and when they do, the defendant will likely deny infringement and assert invalidity.
Invest the resources appropriate to the significance of the invention to your business, draft the application carefully, adequately describe the invention, differentiate it from prior inventions, anticipate how others will design around it. A patent that survives these challenges is truly a high-quality patent.
Patent Strength Analysis: 15 Factors to consider for Patent Licensing
Patents by first inventors - A patent inventor contributes to the claims of a patented invention. There can be multiple inventors for a patent. If the first inventor has a higher number of patents assigned to his name, then the inventor’s patent drafting experience and his field experience contribute to the strength of the patent. Hence, the more the number of patents by the first inventor, the higher is the strength of the subject patent.
Length of patent prosecution - Patent prosecution is the process of drafting, filing, and negotiating with USPTO in order to obtain patent protection and rights for an invention. The patent is less likely to be litigated if patent prosecution has a higher number of non-final rejections and the USPTO examiner has provided a higher number of prior art references. Therefore, the subject patent has low strength if the length of prosecution is too long.
Number of Dependent Claims - Dependent claims refer back to and further include all limitations of the recited claim. The dependent claim adds more limitations to the independent claim covering present and future aspects of the invention. Higher the number of dependent claims, the higher the strength of the subject patent.
Number of Independent Claims - Independent claim covers all claim limitations and/or covers a different aspect of the invention than other independent claims. More the number of independent claims, the broader the patent covers the novel technology. The higher number of independent claims leads to the higher strength of the subject patent.
Number of inventors - Each inventor has a valuable contribution in a patented invention to broaden its scope and to cover all possible future aspects. A More number of inventors indicate that the research has been thoroughly done to come up with a novel invention. Hence, more number of inventors indicates higher strength of the subject patent.
Backward Citations - Patent citations are the references defining technology already known within either patents or other scientific literature on which the present patent shaped or which it uses. The cited-backward are patents referenced during the application process of the patent. Patents listed as cited-backward came before the patent and the patent built upon them in some way. There is no set pattern or formula to determine the strength based on the number of citations, but we can say if forward citations are more and backward citations are also more, then the subject patent has high strength. If forward citations are less and backward citations are more, then the subject patent a low strength.
Forward Citations - The cited-forward are the patents who refer to a subject patent as prior art during the application process of the patent. If the subject patent has more number of forward citations then it indicates that the subject patent’s invention is being used as a ground for a future breakthrough invention. Therefore, the more the number of forward citations, the more is the subject patent strength.
Life Remaining - The term of every patent granted is 20 years from the date of filing of the application. However, for the application filed under the national phase under the Patent Cooperation Treaty (PCT), the term of the patent will be 20 years from the international date accorded under PCT. Life remaining is the term left on the patent before it gets expired. Longer the term of life remaining, the higher the strength of the subject patent.
Market Segment - The field of the invention in the subject patent applications refers to the broad area of technology under which the patent falls. The market segment under which the technology comes can decide the strength of the patent. If the technology solves significant problems and is widely used/implemented by the top players, then, the patent has higher strength.
Size of family - A patent family is "a set of patents taken in various countries to protect a single invention (when a first application in a country – the priority – is then extended to other offices)." If the subject patent has a larger family size, it indicates that the same invention is protected in more than one country and is useful worldwide. Therefore, a larger family size indicates the higher strength of the subject patent.
Prior Litigation - Patent litigation is the legal process that unfolds when someone who owns the patent for a particular invention enforces their right by suing another for manufacturing or selling the invention without permission. If the subject has more prior litigation, then the subject patent’s invention is being used over and over by a good number of companies. Therefore, the more the prior litigation, the higher the strength of the subject patent.
Number of Drawings - A patent drawing illustrates the invention, some of its embodiments (which are particular implementations or methods of carrying out the invention), or the prior art. More the number of drawings, the higher the strength of the subject patent.
System vs method claims - A system claim is a claim directed to a system having a number of different components that work together. For a system claim, the defendant must make, use, sell, and/or offer for sale every component of the system claim individually or together. A method or process claims will include active steps to achieve a certain result. For a method claim, the defendant needs to perform and/or induce others to perform the claimed invention. Therefore, the higher number of method claims as compared to system claims lead to the higher strength of the subject patent.
Length of First Claim - First independent claim of the subject patent covers all claim limitations. If the first claim is too long and is limiting the invention, then the subject patent has low strength.
Means Plus Function Claims - Under the statute, a term claimed in means-plus-function format will be construed to cover the corresponding structure that is described in the specification and equivalents thereof. The idea behind means-plus-function claims is that it is often much easier and more straightforward to claim a means for doing something rather than listing (in a claim) all the possible ways of accomplishing the task. Claim language becomes too broad when claims are construed as means plus function limitation and the subject patent is more vulnerable to 101 issues. Therefore, the subject patent with a higher proporto of means plus function claim has low strength.
Copperpod provides Portfolio Analysis to identify high value patents in a given portfolio and their licensing opportunities. Copperpod's IP monetization team helps clients mine patent portfolios for the best patents in a given portfolio. Our portfolio analysis is built upon a deeply researched algorithm based on 40+ parameters - and ranks each patent according to a highly customized PodRank. Please contact us at firstname.lastname@example.org to know more about our Portfolio Analysis services.
Gagandeep advises clients on infringement investigations related to electronics, telecommunications and software. He has a Master’s degree in Electrical, Electronics and Communications Engineering and a Bachelor's degree in Electronics Engineering. His interest areas are Internet of things (IoT), Semiconductor, Operating Systems (Android/iOS/Windows/Linux), Embedded Software and Sensor Networks.
Keywords: Patent Licensing, Patent Services, Patent Quality, Portfolio Analysis, Patent Quality Metrics, Investment Analysis and Portfolio Management, Patent Application Process, Patent Registration Process, Patent Valuation