Patent Pruning: Key Parameters that Every Business Must Consider
Companies around the world often seek opportunities to leverage their IP assets for their overall business growth. Among these assets, patents are one of the most important ones. Since maintaining patents require sizeable monetary investments, it is important for companies to frequently evaluate and optimize their portfolios. One efficient way of doing this is by pruning patents. The following article discusses the crucial parameters that companies must consider while patent pruning.
Costs Involved Maintaining Patent Portfolios
Before we discuss patent pruning, it is important to first understand the costs involved in maintaining patents. Generally, the monetary investments involved in filing and maintaining patents include research and development (R&D) expenses, filing & prosecution costs, and maintenance fees. Out of these, patent maintenance fees increase with each passing year. In fact, this cost increases significantly for patents that are maintained for more than 10 years as they are assumed to hold a high market value. This means that companies must assess their patent portfolios, identify irrelevant patents, and discard them to avoid paying unnecessary maintenance fees.
Patent Pruning: The Efficient Way to Discard Substandard Patents
Patent pruning is the process of analyzing a company’s patent portfolio to identify, categorize, and optimize patents. This helps in abandoning low-quality patents to enhance the overall value of the patent portfolio. Put simply, patent pruning helps companies in optimizing their patent portfolios to save a significant amount of money that is often wasted in maintaining irrelevant or substandard patents.
How Large Companies Maintain their Patent Portfolios Effectively
Large companies with substantial patent portfolios often engage in pruning to obtain high-quality patents. IBM is one such company that is reportedly discarding more than 50% of its patents that are due for renewal. The graph below depicts that U.S. patent abandonment trend of IBM wherein one can clearly see that while earlier (2002-2010), the company abandoned most of its patents when they were due for a second renewal (7.5 years), recently it has started discarding patents that are due for first renewal.
How to Prune a Patent Portfolio
Now that you are aware of the importance of patent pruning, let us learn how to perform this process effectively. Below, we have listed down the key steps that companies must follow:
- Identify Core and Non-Core Patents – The first step is to categorize the patents as core and non-core. Core patents are the ones that are related to a company’s core technology and ones that protect its products. The remaining patents are considered non-core. Besides core and non-core classification, other parameters that can help in shortlisting patents for pruning include market applicability and future relevance of the protected technology.
- Bundle Similar Patents Together – After segregating the patents, it is important to identify the patents that are similar and bundle them together for further analysis. The categories that one can consider for bundling patents can be related to technology domains, jurisdictions, application areas, etc. This can be achieved using patent landscape techniques utilizing the international patent classification (IPC)/cooperative patent classification (CPC) codes or by applying sophisticated similarity algorithms and business intelligence methods.
- Sort the Patent Sets – Thepatent sets (patent bundles) that are identified for pruning can be further sorted based on certain key variables that help in creating different viewpoints given the specific risk-tolerance and decision-making bandwidth. Some of these key variables are:
- Patent Life – While the lifespan of patents is generally 20 years, this term can be shortened if they are not renewed by paying the required maintenance fees. Furthermore, as the term of a patent increases, the required maintenance fees also increases. This means that in order to save costs, companies should intelligently analyze the market applicability or future relevance of their old patents and prune the ones that are irrelevant.
- Patent Family Size – Patent family size is also an important variable that identifies the patent families comprising of a large number of patent members. Such an identification is crucial since a large patent family not only requires a larger investment during filing but is also expensive to maintain. Typically, there are two types of members within a patent family. One member protects a similar invention in different jurisdictions, while the other protects the different aspects of the invention within the same or different jurisdictions. Thus, based on an exhaustive analysis of the potential of an invention’s particular aspect in a jurisdiction, patent family members can be abandoned or maintained.
- Forward Citations – A forward citation is yet another variable that can help in deciding the importance of a patent. This is because a relevant patented technology will usually be cited by other key players of the technology domain. A significant number of forward citations of a patent show that it has great potential according to other companies in the same domain. Thus, patents with no or low forward citations can be filtered out for pruning.
- Citations Per Year – This is also a critical variable that can help in filtering out patents with growing market potential. More citations per year suggest that the patent’s market potential is increasing. Such patents are important for companies as they help in preventing their competitors from grabbing their market share.
- Self-citations – This variable determines whether the technology protected by a patent is important for a company. This is because a patent is cited by a company only if it protects a product or its associated technology. Higher the self-citations, higher the chances of that patent being related to the company’s core technology.
After completing the final step, i.e., sorting the patent sets, companies get to know the patents that are irrelevant. Such patents should be pruned either by selling or abandoning them. In case the irrelevant patents have high potential for infringement, they can be sold to the relevant buyers. While those that are neither relevant nor have any infringement potential can be abandoned.
Monetary Benefits of Patent Pruning – Sagacious IP’s Outlook
Within the past one year, Sagacious IP has helped its clients save money to the tune of USD 1 million by just pruning patents. For instance, from the revenue-generating perspective, we pruned more than 100 patents for a company, thereby helping it make approximately USD 5 million via patent sales. While in terms of cost-savings, we pruned more than 40 seven-year-old patents to save approximately USD 440,000.
Pruning patents allows companies to assess, organize, and optimize their patents. By doing this, they not only increase the overall value of their patent portfolios but also saves cost. If you are a business that is looking for pruning-related services for your business, Sagacious IP can help. Our Patent Licensing and Monetization service provides complete solutions, from ranking a patent portfolio to assessing possible licensees that enable clients to generate money from their IP.
– Prashrita Kaushal, Amit Kumar (ICT Licensing) and the Editorial Team