A single patent can provide enormous commercial value to a business. As an example, the patent for the telephone—widely the most valuable U.S. patent ever—drove billions in revenue. In today’s world, the largest and most successful U.S. corporations hold more than just one patent. Start-ups and other innovative companies can also reap the benefits of a well-structured patent portfolio. This raises an important question: How does a company build a patent portfolio?
Like most legal answers, it depends. But, considerations of patent law, strategic business goals and foresight, and the most valuable aspects of your innovations can certainly help construct a patent portfolio. Ultimately, your company’s unique needs and business goals drive the creation of an effective (and strategic) patent portfolio. In this blog post, we’ll delve into the business value of a patent portfolio and provide several actionable steps to help you build a comprehensive patent portfolio.
Understanding a Patent Portfolio
A patent portfolio is a collection of patents owned by an individual, business, or organization. It's a strategic tool to safeguard a company's inventions and innovations effectively. A well-designed patent portfolio should reflect a company's business objectives, prioritize its most valuable innovations, and provide comprehensive IP protection against competitors. Sounds all and well, but what distinguishes the values of different patent portfolios?
The value difference between a well-designed patent portfolio and a poorly designed one lies in the strategic alignment with business objectives, the scope of protection, and the potential for revenue generation. A well-designed patent portfolio focuses on protecting the most valuable innovations and technologies that are critical to the company's success. We often see individuals and companies wanting to file a large number of patents–but, are they the right patents to file? Are they the most valuable patents you could file?
We think these are crucial considerations, but many patent attorneys don’t bring up these questions and end up writing as many patents as possible. But, that’s expensive and often wasteful legal spend. A poorly designed patent portfolio contains patents that do not provide adequate protection or take into consideration business objectives, resulting in limited competitive advantage and potential wasted resources.
A well-managed patent portfolio can also enhance a company's competitive advantage by creating barriers to entry and generating revenue through licensing or selling patents. By strategically protecting key innovations, a company can make it difficult for competitors to enter the market. Others’ won't be able to develop similar products without illegally infringing on the company's IP rights.
A well-managed patent portfolio can enhance a company's competitive advantage. Here's a case of Texas Instruments (TI) – a global semiconductor company with its extensive patent portfolio. In 1990, TI reached a historic cross-licensing agreement with Samsung, which enabled both companies to access each other's patent portfolios. TI was allowed access to Samsung's patents on memory chips, while Samsung gained access to TI's patents on digital signal processing. With this new access, they were able to generate generous licensing revenue and also defend against competitors with a strong barrier to entry.
Recognizing the Business Advantages of Patents (Short-Term and Long-Term)
Why should a business go through the time, effort, and expense of putting together a comprehensive patent portfolio? And just to be clear, construction of a patent portfolio can be a serious investment of your resources. The simple answer is that a patent portfolio can be instrumental for commercial success, both in the short term and the long term.
The Short-Term Benefits
To start, securing a patent immediately safeguards against others attempting to copy an idea. This legal protection preserves R&D investments, shields the company from potential revenue loss, and helps keep a competitive advantage (if there is one).
A well-built patent portfolio also opens up licensing opportunities with others. Licensing agreements can also provide a stream of revenue by granting other companies the right to use the patented technology. (You can read more on licensing agreements in our blog post here)
The Long-Term Benefits
The abiding long-term value of patents may seem intangible but can yield tangible long-term benefits for a company. Holding multiple patents bolsters brand recognition as an industry-leading innovator. Apple Inc. is a prime example of a company that holds multiple patents that have bolstered its brand recognition as an industry-leading innovator. Branding matters. Their extensive patent portfolio covers various aspects of technology, design, and software (it shows their commitment to innovation) and establishes their position as a market leader.
As mentioned before, patents are valuable commercial assets protected for many years and can be bought, sold, or traded. Take, for example, Google’s acquisition of Motorola for $12.5 billion in 2011 (which was primarily to secure Motorola's extensive patent portfolio, which consisted of over 17,000 patents). These patents were important because they allowed Google to protect its Android ecosystem and enhance its competitiveness in the mobile market. Patents have tremendous potential commercial value and can provide strategic advantages to companies.
Four Actionable Steps to Build a Patent Portfolio
You know that a patent portfolio has many benefits to a business that knows how to establish and protect its IP. But, how do you create an effective one?
1. Identify Your Goals
Before beginning the patenting process, determine the company's goals and the purpose of the patent portfolio. What are you trying to protect? What are you defending against competitors? How do you plan on generating revenue through licensing? Answers to these questions will guide the patenting process and ensure the portfolio aligns with the company's overall business strategy. For example, IBM has consistently been among the top patent holders in the U.S. (they have a diverse patent portfolio from AI to cloud computing). Their patenting strategy is driven by their clear goal of maintaining its leadership position in these technology areas.
2. Set a Budget, Know the Costs
Building a patent portfolio can be expensive. Have a budget in mind and be aware of the costs associated with each step (look for filing fees, attorney fees, and maintenance fees). In many cases, it would be beneficial to conduct a cost-benefit analysis to determine the value of each potential patent application before you go straight into filing patents. We recommend startups to focus on patenting only its most critical innovations to preserve their limited initial resources (compared to a large multinational corporation who can take on a more aggressive patent strategy).
3. Identify Priority of Innovations
Not all innovations are created equal. Identify and prioritize the most valuable innovations for patenting. This process may include conducting a patent search to identify potential competitors and researching the market to ensure the innovation has commercial value. Prioritizing the most critical innovations for patenting will help ensure that the portfolio aligns with the company's business goals and maximizes the potential value of the patents.
4. Be Proactive (Deadlines are Key)
Building a comprehensive patent portfolio demands proactive management. Track and manage filing deadlines and maintenance fees to keep the portfolio up-to-date and relevant (you're patent attorney should help you with reminders and updates). For patent applications, timelines are really important. Patent law is fundamentally deadline-driven. The Paris Convention, for example, grants a 12-month priority period for filing patent applications in other member countries after the first filing in one member country. Missing that deadline means losing potential patent rights in those areas.
Add Value Through Strategic Patents
As a boutique patent law firm, Outlier Patent Attorneys take a strategic approach to help our clients file patents—and build patent portfolios—in a more effective and cost-efficient manner. Above all else, we are focused on strategy and value. Our legal team has vast experience with all aspects of the patent process. Among other things, we strive to provide clients with the following:
Strategic guidance to help them better understand and protect the value of patents;
More transparency and visibility into the patent application process itself;
Better results, with a higher allowance rate and a lower rejection rate; and
A focus on return on investment (ROI) by reducing wasteful legal spending.
Schedule a Confidential Consultation With Our Patent Lawyers Today
At Outlier Patent Attorneys, our patent strategy attorneys are experienced and solutions-driven advocates for innovative businesses. We go above and beyond to provide clients with personalized IP guidance. If you have any specific questions or concerns about building a patent portfolio, our team can help. Call us now or contact us online to request your confidential initial appointment.