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Software programs that aid decisions whether or not to keep patents are useful, but should be relied on only to a point.
David McCann, CFO.com | US
May 4, 2010
For players in innovative fields like technology and pharmaceuticals, winning patents is a big part of the battle — and so is getting rid of them. Large companies may hold thousands or even tens of thousands of patents, some of which they no longer need or want.
Battling "patent creep" can be an important fiscal activity because of renewal fees, which in the United States must be paid at three intervals: 3.5, 7.5, and 11.5 years after the initial filing with the U.S. Patent Office. For a company that has, say, 1,000 patents approaching the third threshold, renewing all of them will cost approximately $4 million. That's on top of the smaller fees that many countries charge annually to keep patents active.
Continually evaluating portfolios to determine which patents to keep, abandon, or sell is a big job that can be made somewhat easier by using patent-valuation software programs. There is a growing crop of them, typically operated on clients' behalf by intellectual-property advisers, as well as some other third parties that valuate companies' assets, like investment banks and mergers-and-acquisitions consultants.
The latest to enter the fray is CPA Global, a provider of intellectual-property management services, which on April 26 launched its new Patent Renewal Monetization program. One of CPA's main lines of business is managing patent-renewals payments. Now, when a client instructs the firm to discontinue payments on a patent, CPA applies a software-based scoring system to gauge whether the patent might in fact have remaining value.
The program evaluates the patent on 25 parameters, weighted according to the sector in which the patent exists. For example, one of the parameters, the age of the patent, is very important for patents on both cell phones and cancer drugs, say, but in different ways. While the useful life of a cell-phone technology may be only a few years, drugs often achieve their greatest value much longer after patent applications are filed, following several years of working their way through trials and approvals.
Other parameters include the number of claims in the patent regarding the product's uniqueness, and how many citations — or references to the patent in other patent applications or patent examiners' reports — it receives.
"It's a double check on their decision," says James Pohlman, vice president of patent monetization for CPA Global. Many companies are conservative about abandoning patents, he notes, because "an IP attorney will never get fired for renewing a patent, but could get fired for abandoning the wrong one. So, we're giving them reassurance that it was a good decision."
If the software indicates remaining value for a patent but the company still wants to abandon it — because, for example, it has moved out of a particular market — CPA Global will try to sell the patent through an online portal it developed jointly with ICAP Ocean Tomo, an intellectual-property brokerage. "Don't abandon something you could sell," says Pohlman.
Such programs can be useful for preliminary screenings or final checks, particularly compared with the cost of engaging a patent attorney. CPA Global, for example, is offering its software service to its renewals clients for free.
Be careful, though, about relying on them too much. "It gives you an analysis based on hard facts," says Nanda Kumar, a patent attorney with the law firm Reed Smith in Philadelphia, which uses CPA Global to make its clients' renewals payments. "But patent strength is measured by legal analysis, too. If you come to me to ask whether you should hold on to a patent, I'll ask you a lot of questions."
Richard Dayan, a former IBM inventor who is now an independent patent consultant, says that while he does not use an automated program to review and rate his clients' patent portfolios, "some of them do a good job." Relying solely on them to make decisions, though, would be "crazy," he says. "You have to have a human involved who knows [the field the patent is in] and where the market is going."