Strategic Patenting in a Post Patent Reform Environment

Strategic Patenting in a Post Patent Reform Environment

Strategic patenting is the methodical filing and prosecution of patent applications. Strategic patenting is performed with the objective of creating a patent portfolio that can be monetized through sale, licensing or litigation. Strategic patenting involves the purposeful mining of ideas from researchers and the marketing and sales staff. These ideas are then perfected through cost-effective research and study of the prior art. In this Analysis, Charles A. Eldering discusses strategic patenting in the context of the patent reform. He writes:

     The methodology behind strategic patenting is not magic, nor is it completely unknown to patent practitioners. It is, however, largely ignored, due in part to the constraints imposed by traditional corporate patent process and the expectations set on many patent prosecutors. The requirement for prosecutors to "obtain a patent" regardless of the breadth of the claims often results in patents that have overly complex or narrow claims. This requirement frequently results in patents with little or no economic value. This is not to say that all patents should have simple and broad claims; the prior art simply does not allow that. Rather, patent practitioners can and should keep the end goal in mind--the allowance of sets of claims that have the highest possibility of being monetized because they cover a technology or market as that technology or market evolves.

     Many patent practitioners have, over the decades, developed strategic portfolios worth tens, if not hundreds, of millions of dollars for their clients. Hitachi and Texas Instruments, for example, are known to generate significant revenue from their patent portfolios. From 1970 - 2000, Hitachi engaged in four stages of strategic patenting that would ultimately generate $ 455 million in patenting royalties per year. During one of these stages of strategic patenting, Hitachi increased its patent licensing revenue by approximately 200 million yen per year by filing basic patent applications on what it anticipated as society's technological direction. Similarly, Texas Instruments avoided bankruptcy in the mid-1980s through an aggressive strategy of patent licensing and enforcement. Texas Instruments would eventually become a leader in strategic patenting and, by 2000, generate approximately $ 800 million per year in patent licensing fees. Although well known and acknowledged in the patent licensing community, the role of strategic patenting in these successes is not always appreciated. But for the constant attention to the direction of the claims of the portfolio these patents would have probably only generated a small fraction of the total revenue they ultimately produced.

     In spite of the known advantages of strategic patenting, there is a tendency towards rote filing and prosecution, with little objective in mind. Patents are an asset class. Developing a patent portfolio is no different than building an investment portfolio. A positive, and often substantial, return should be expected. Businesspeople and prosecutors should always consider the return on investment generated by research and legal costs.

     Can this be done? The data suggests yes. Twenty years ago, the buying and selling of patents was viewed as an esoteric market, which only existed due to the needs of parties in litigation. Today, the purchasing of patent assets, both for portfolio building to support ongoing or emerging businesses, as well as to generate revenue, is commonplace, widely accepted, and viewed as a good use of intellectual property. Ten years from now, the strategic building of patent portfolios, with clear goals and measured economic returns, is likely to be commonplace.

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Overview of Aspects of Patent Reform Impacting Strategic Patenting

First-to-file

     The AIA transforms the U.S. Patent System from a first-to-invent system to a first-to-file system by establishing new conditions for patentability under 35 U.S.C § 102. Prior to the enactment of the AIA, 35 U.S.C § 102(a) denied an applicant a patent if his or her invention was described in a patent or publication prior the applicant's invention date.

     The AIA amends 35 U.S.C § 102 so that an applicant is denied a patent based on disclosures made before the effective filing date of his or her patent application. These disclosures include patents, printed publications, public use, or sale of the invention. Disclosures made by an inventor or joint inventor within one year prior to the patent application are not considered prior art against the inventor and will not result in the denial of a patent grant. The first-to-file provision is effective 18 months after enactment (March 16, 2013).

     Patent professionals will be required to create applications and portfolios in an expedient and timely manner as a result of the first-to-file provision. The first-to-file provision, along with the institution of a post-grant review process, suggests that expediency in filing will require timely applications and thorough searches to minimize the possibility that third parties will put issued patents into review.

(footnotes omitted)

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