Is It Time for a Serious Evaluation of Your Patent Assets?

by Alec Schibanoff

A question that every owner of multiple patents should consider is: What is the best course of action for each of the patents it owns? The way to start that process is with what is called “Patent Triage.” The term “triage” is most often used in medical scenarios. When there is a disaster with multiple injuries, the injured are brought to a medical facility and they are immediately triaged. They are evaluated using medical community standards to determine who needs critical care, who needs intense care such as surgery, who can wait for treatment, and who really needs to be sent home. The key, of course, is to save lives by making sure the most seriously injured are treated first.

While no one usually dies in the process, Patent Triage is a patent-by-patent evaluation of a company’s or a university’s or an inventor’s patents to classify each one, and from that evaluation have a strategy for that asset. Once classified, the smartest course of action for each patent becomes clear. For those who cannot see the patent forest for the patent trees, the solution is to totally avoid the forest, and look at each individual patent.

Patent Triage includes the evaluation, patent-by-patent, of the entire collection of assets, and putting each patent into one of five categories.

♦ Core Patent: These are patents that a company is practicing in the products or services that it sells, they are essential to the enterprise, and they should be professionally appraised – if they have not been – to determine their value so that value is reflected in the company’s Balance Sheet. Universities and inventors do not have Core Patents, only businesses.

♦ Assertion Asset: These are patents that appear to be infringed – with “appear” being the key element here. There are several indicators that a patent can have that it is being infringed – the number of Forward Citations is just one. These patents need to be further studied in a second process to determine if there is infringement, who the infringers are, and – if appropriate – to document that infringement with Claim Charts. An infringed patent – based on who the infringer is – can be a patent that has considerable under-utilized value, and that value can be realized using a few different strategies. A patent can be both Core and Assertion – and often is, and the infringer is a competitor of the patent owner.

♦ Licensing Candidate: This is a patent that has the potential to generate royalties, but may not be because all the prospective licensees are direct competitors of the assignee, and the patent owner does not want to created competition for its patented product. And while that makes sense, it is not always the case that it will create new competition. There are instances in which a patent can be licensed to companies that are in concentric businesses – enterprises that have related, but not directly competing products – to the patent owner’s business. One of the most attractive aspects of a Licensing Candidate is that it can generate income with no Cost of Goods Sold! A patent can be Core and/or Assertion and/or Licensing.

♦ Divestiture Patent: This is a non-core patent – a patent that covers a technology that the patent owner is not practicing – that is likely to have little real value for the business. Divestiture Patents should be referred to a patent broker to see if they can be turned into cash. It is not uncommon for a company to file for a patent on a new technology, but for one of several reasons – from lack of marketing to bad timing to too high an investment to distribution or packaging issues – the business never commercialized the patented invention. A Divestiture Patent might also be a Licensing Candidate, but it is definitely not a Core Patent and not an Assertion Asset. It may be time to put up some of your patents for sale!

♦ Non-Core Patent: When a business believes it has a new technology within its grasp, it should always file for a patent for that invention. Better to have a patent for an invention you do not practice than not have a patent for a technology that you do practice! The result of this activity – an activity we strongly endorse – is that sometimes a company ends up with a patent that is simply not core to its business, but it is not a patent with licensing or sale potential. For example, the technology covered by the patent was cutting edge when the patent application was filed, but just a few years later – when the patent was granted – the invention is no longer practical, or other technologies have replaced it, or the market has gone elsewhere. A good example of this are the electronic typewriters that hit the market in 1980 and 1981. They were a great idea in their heyday, but the PC made electronic typewriters obsolete by 1983. It is not even worth paying the maintenance fees on the Non-Core Patents, and they should be abandoned. Needless to say, those patents that are triaged as “Non-Core” do not fall into any of the other categories.

Every business, every university, and every inventor needs to know what’s in the warehouse, especially when that warehouse is full of patents. Owners of multiple patents should contact a patent broker that offers IP consulting services, and have a patent triage performed on its patent inventory. You have to know what’s in your warehouse!

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