Emmett J. Murtha and Robert A. Myers
Fairfield Resources International
August 14, 2000

Introduction

Patents are rarely worth much if no one other than the patent owner is interested in practicing the covered invention. This is obvious if the objective of patenting is to maximize licensing revenue, but it also applies if an organization patents to exercise its exclusionary patent monopoly. In this case, too, if no one wants to copy a product or service, the "protection" provided by the patent is practically worthless.

Many companies with substantial patent portfolios realize licensing returns on their portfolios which are well below those of licensing leaders such as IBM and Lucent, even normalizing for portfolio size. Studies by organizations such as Chi Research further show that such companies' patents are often cited less frequently than those of their peers. On the other hand, the patent productivity of their R&D as measured by patents per dollar spent is not necessarily low, which raises an important question about the value of this popular metric.

FRI's detailed review of several clients' patent portfolios points to a number of areas where relatively simple adjustments in patenting practices should lead to significant improvements in a three to five year time frame. A key outcome of this improvement would be patents which should be more easily licensed and which should produce more licensing income. This short paper will review these measures, with particular emphasis on patents which are in general farther from the marketplace, such as might be generated by an advanced development or research group.

Key areas for improvement include the following:
  • Manufacturing and design method patents
  • Patents with very long and detailed claims
  • Identifying and patenting potentially important technological trends
  • Patents on innovations in research infrastructure
  • Patents and know-how as a base for profitable strategic alliances
  • Patents which are central to a NEW or evolving standard

Manufacturing and design method patents

Patents which cover manufacturing and design methods are as a rule very difficult to discover and enforce. Discoverability - even if possible in principle - may often require actual physical examination of an asserted infringer's facilities. This is rarely feasible. Even when a manufacturing method patent does define a process in such a way that devices made in accord with the patented method can be discovered, such discovery still, as a rule, requires significant reverse engineering or tear-down. An important challenge for inventors and attorneys is to embody such key inventions in patents with broad and/or discoverable claims. Where specific device or use claims cannot be obtained, serious thought must be given to keeping the method or process a trade secret, particularly in those cases where the process cannot be discovered even if embodied in a product.

Patents with very long and/or detailed claims

There are many inventions which may form the basis for a valuable product or product line but which may nevertheless not warrant filing for patent protection. In particular, when the patent art is very mature and crowded, or the invention itself is complex and requires considerable detail to cover in acceptable claim language, the result is a patent with very long and detailed claims. Such patents are relatively easy to write and may not encounter much opposition from an overworked examiner. However, it is extremely difficult (as well as time consuming) to demonstrate that an infringer has infringed every single element of such complex claims. Indeed, it is rare that a patent owner would even contemplate trying. Naturally, a good attorney will try to precede such claims with more general claims, only to be rebuffed by the examiner. Upon receiving an office action of this sort, serious thought should be given to withdrawing the application, thereby saving filing fees and attorney and inventor time. Good patent practice ordinarily suggests that even when a claim can be allowed, this type of invention should be maintained as a trade secret. Often, instead of keeping the invention secret, the best interests of the invention owner would be served by simply publishing the invention.

Identifying and patenting potentially important technological trends

Well-managed R&D organizations have a commendable propensity for identifying potentially important technological trends, and filing for a wide range of patents in an early attempt to protect the entire field. Early in the life of a technology, there are advantages to this approach, but it is costly and often unnecessary. Even when an organization has done a good job at picking winning technologies, and in following this up with good research and advanced technology, some of this leadership position may be eroded or lost when insufficient attention is paid to getting the best possible patents, or where resources are inefficiently invested in getting too many patents. In cases where research management has an early lead, it may be sufficient to stake out a patent position with a few broad patents, and then co-opt potential competitors by simply publishing the detailed improvements and variations. For these technologies, the challenge is, quite naturally, to define the key aspects of the technology in such a way that the first patents filed do, indeed, provide the needed exclusionary monopoly.

Patents on innovations in research infrastructure

Many research organizations are quite properly proud of their innovations in what one might call research infrastructure. This includes measurement tools and methods, as well as test and other software. Sometimes, these innovations and inventions are the basis for important and valuable patents. More often, however, patents in these areas are primarily useful only in adding to the weight of the total patent portfolio, and in enhancing the resumes of the inventors. Serious attention must be paid to the question of whether or not to patent inventions which are mainly or only useful to other researchers. Discovery of infringement of such patents ordinarily requires some kind of on-site observation, not always feasible or even possible. Even when infringement can be easily discovered, recoverable royalties or damages will not be significant, nor are such patents of much value in cross licensing negotiations. Here too, the test is to identify the broadest possible claim for a device, process, or method, and to claim it in language which expands rather than limits the scope of a resulting patent.

Patents and know-how as a base for profitable strategic alliances

Important innovations and inventions, whether as patents or even when maintained as trade secrets, can often be used as a base for profitable strategic alliances. Most modern technologies are too complex to be successfully commercialized without partners with complementary skills and human and financial resources. An example is Display Technologies Incorporated (DTI), the IBM-Toshiba joint venture that has supplied both partners with flat panel displays for many years. The initial technology development alliance arose when Toshiba, a major consumer electronics supplier and leader in the early stages of TFT/LCD technology development, felt it would benefit from a partnership with a company which had a stronger intellectual property portfolio in the computer industry. IBM, for its part, was looking for a partner with strength in high volume, low cost manufacturing, as well as leadership in the flat panel display technology, since IBM's IP portfolio in the TFT/LCD technology was generally thought to be weak. IBM, however, brought to the partnership unequaled know-how about the IT marketplace, great strength in semiconductor research, development and manufacturing, and substantial experience in commercializing its large flat plasma display panels. In addition, neither partner was fully confident that it had the necessary people, capital, and know-how to succeed on its own.

For inventions (and know-how, as well) having this strategic potential, a useful question is to ask whether, even if a patent were granted, the recipient has and will maintain sufficient resource in the area to be able to earn a return through a licensed technology transfer. Our experience suggests that a strong technology organization can often realize higher financial returns through establishing strategic alliances based on a program of licensing its trade secrets ("know-how") in valuable business areas than it can by carrying the full commercialization investment on its own. Two good examples are the commercial success of DTI and the technological accomplishments of the semiconductor technology development alliance between IBM, Siemens and Toshiba.

The potential utilization of a patent or trade secret in establishing a win-win alliance is thus an important factor in its total value. This holds true even in a low-tech or non-tech area, so long as the prospective partners have an opportunity to create a "one plus one equals three" partnership. An entrepreneurial intellectual property organization should actively monitor alliance prospects throughout the patenting process, from encouraging useful disclosures through making decisions on whether or not to abandon issued patents.

Patents which are central to a NEW and evolving standard

A very difficult but potentially very rewarding payoff for an active patenting program occurs when one can obtain a patent on a technology, method, or process which is central to a NEW or evolving standard. Such opportunities are rare, but the reward will most often be earned by an organization which is adequately prepared. For example, contention between researchers and management may arise when a researcher's work is a candidate for a NEW standard. Standards bodies almost invariably assert that they will only consider proposals which are royalty-free. The researcher's personal and professional interest primarily lies in having his work recognized by his peers, and future royalties may be of little or no concern. On the other hand, most standards organizations will agree to a reasonable, non-discriminatory royalty. A royalty of even one per cent on a major standard can be very profitable, and intellectual property management must take a firm position against giving away a potentially valuable asset. No less important, even when the patents which are deemed essential for a standard have to be licensed for a nominal royalty, patents on features and enhancements can nevertheless be licensed for what the traffic will bear. Thus, patenting organizations need to be conscious of possible standards implications, and of the value opportunity they provide, so as to make their patenting decisions clearly appreciating any potential standards implications.

Conclusion

Our experience has shown that by applying some relatively simple tests when an invention is first disclosed, paying attention to a few specific areas where resources can be wasted, and focusing on the better business opportunities will facilitate developing a leaner and more valuable patent portfolio in a relatively short period of time.

02/05/02 Copyright 2000 - Fairfield Resources International