For corporations and entrepreneurs seeking to monetize their un- or under-utilized patent rights for the first time, it can be difficult to know where to begin. The patent monetization market is not yet mature and, as with other emerging marketplaces, no established methodologies and few experts exist to guide patent owners through the process. Today, there are as many as 17 different business models used to monetize patent rights. More will likely spring up as the market continues to evolve, even while some of the current models will certainly fall away. With such a range of options, it is not surprising that those seeking to sell their patent rights may be confused about what path to take.
This blog post is intended to provide an overview of ways that a corporate and individual patent owners can most effectively monetize their patent rights in today's market. The models discussed in this article were chosen because they are currently the most common. Significantly, due to the great variability in patents and the individual needs of patent owners, the best model for a particular patent owner might actually one that is not discussed here. Nonetheless, it is hoped that after reading this, a corporation or entrepreneur seeking to sell their patent rights for the first time will be better able to understand and execute on the opportunities and challenges present today in the patent monetization market.
Thinking of Selling a Patent Directly to a Corporation Without an Intermediary? Forget About It
Most patent owners assume that it is possible to sell a patent directly to a company that might play or seek to play in the product or technology space covered by the patent. This is rarely the case, however.
When I was employed as a senior IP attorney in a consumer products company, it was corporate policy to reject all unsolicited offers to purchase or license patents that came into the organization. Thus, a patent owner did not stand a chance to get their patent sold to my company.
This absolute prohibition on unsolicited ideas is not the policy at all companies, but, in truth, few companies today actively seek to acquire products and technology from outside sources (although this is starting to change with the drive toward open innovation at many companies). Thus, even if a patent is a perfect fit for a company's product or technology offerings, most organizations will nonetheless prefer to pass on an opportunity to purchase the patent because external technology acquisition is not part of their technology development model. It is therefore doubtful that most patent owners can hope to successfully sell their patent rights directly to a corporation because the latter is not in the business of buying patents generally, and specifically not from individual patent owners.
Patent Aggregators: Buyers of Patents if a Patent Owner Can Get a Foot in Their Door
In recent years, companies have emerged that hold business models centered on the buying of patents held by others. Well known patent aggregators today include Intellectual Ventures, RPX and Allied Security Trust. Each of these companies has a different reason that it seeks to acquire patents, but each can serve as a great resource for patent owners seeking to sell their patent rights in certain technology areas. Nonetheless, there are many more patent owners seeking to sell their rights than exist patent aggregator buying opportunities. As a result, if a patent owners obtains a "no" answer, how does he know it is because his patent is worth nothing to the aggregator or whether it's because he did not know the right person to get his patent in front of at the patent aggregator company? For most patent owners, especially those participating in the patent monetization market for the first time, patent aggregators will not serve as a likely direct purchaser of their patent rights.
Patent Brokers: Facilitors of Patent Sales, For a Price
Brokers such as IP Investments Group, IPotential and IP Transactions Group can assist patent owners in presenting their patent to a likely buyer, the most likely of which are patent aggregators, non-practicing entities ("NPE's) and, sometimes, corporations. By leveraging their relationships and reputations, patent brokers effectively serve as "filters" for potential patent buyers to streamline and improve the quality of patent buying opportunities. Put simply, patent buyers trust their patent brokers to "separate the wheat from the chaff" to make it easier for them to identify and act on good patent buying opportunities. A patent broker trusted by a patent buyer can thus present the latter with a buying opportunity that the buyer would not have given a second glance to if the same patent had been offered to them outside of the broker-buyer relationship.
There is a substantial cost to hiring a patent broker, however--usually about 25 % of the typical sale price. Patent brokers also require exclusivity. Thus, when a patent owner selects a particular patent broker to represent him in the patent sale, he must trust that the broker will find the best deal. I nonetheless believe that the knowledge and expertise available with a good patent broker can allow a patent owner to obtain a final purchase price for his patent that more than justifies the broker fee.
In particular, the best patent brokers maintain a large network of potential purchasers of patents, including patent aggregators, NPE's and, in some cases, corporations that have expressed an interest in buying patent rights. I believe such broad networks serve a critical function in improving the efficiency of the patent monetization market by possibly raising the final purchase price of patents. When a patent is offered through a quality patent broker, he will ensure that each party participating in the process also knows whom else is being offered the patent.
Such transparency could also result in an increase in the final purchase price when one potential purchaser seeks to ensure that another potential purchaser not acquire that same patent. For example, a corporation might increase its offer to prevent an NPE from obtaining that patent for the purpose of bringing suit against the corporation. This scenario means that those most interested in acquiring the patent will bring their best offer to the table, a fact which should improve the final price paid for a patent.
A further benefit of selling a patent through a good patent broker is that they will typically conduct market analysis of the patent rights to set a rationally-based entry level price. Specifically, the patent broker will set the price based upon what comparable patents have been sold for in the past. These figures normally are not public, so a patent broker with several sales under his belt will likely set a more accurate initial sale price by virtue of the fact that he is privy to information that allows him to do so. Notably, even an experienced patent broker might incorrectly estimate the likely floor price, but when the patent is offered to many likely buyers, the market will typically act to reset the price to one more acceptable to potential buyers.
Beware of Finders Who Say They are Brokers
A significant problem with many people who hold themselves out as patent brokers is that some are not "brokers" at all. Rather, they are "finders" for patent aggregators or other buyers of patents such as NPE's (but likely not corporations). Like regular patent brokers, these finders maintain relationships with likely patent buyers. When accepting a patent for sale to a potential buyer, the finder likely already knows whether a patent will be purchased by its contact. In this scenario, the finder actually does little to earn his 25% fee other than maintain a relationship with the ultimate purchaser of the patent.
Moreover, many of these brokers actually "double dip" because they obtain a fee from the purchaser for bringing the patent to them, as opposed to another potential buyer. The finder thus might hold divided loyalties: should they try to maximize the price obtained for his client's patent when they might never see an opportunity from that seller again, or should they keep the price reasonable so they don't ruin their relationship with their patent buyer to whom they might bring several patent buying opportunities to each year?
Clearly, this scenario is rife with questionable ethics, but the reality of the current patent monetization market is that no licensing is required for someone to call himself a "patent broker," and the rule is definitely "buyer beware." As things stand in today's unregulated patent broker market, the best way to find a quality patent broker is to seek referrals from someone who understands the market and/or who has successfully sold patents through a broker in the past to ensure that someone calling himself a "patent broker" actually serves to broker a patent sale as opposed to handing it over to an old friend who is now a patent buyer.
Patent Auctions: Selling in the Open to the Highest Bidder
The final common vehicle for selling patent rights is the public auction setting. Today, the most prevalent patent auction is conducted by Ocean Tomo, which currently holds 2 auctions each year. Ocean Tomo is very selective about what patents it takes into each auction, a fact that limits the ability of many patent owners to participate in this model. Ocean Tomo obtains a fee from the seller and the buyer, and it is my understanding that the net fee amounts to approximately 25 % paid to the auction house.
While I have not personally been involved in a patent auction, I have heard mixed things from people who have participated as both buyers and sellers in these auctions. My sense is that an auction allows one to sell his patent in a transparent setting where the price is set by competitive bidding. This can be good when a patent is desired by multiple parties who are influenceable by the "heat" of a public auction process to increase their bids to result in a higher price for the seller.
In my view, one downside of the open auction process is that all participants know the price being being offered, a fact that can lead to a lower final sale price if a patent does not garner excitement from the participants. In contrast, in a private auction--such as that effectively set up when a quality patent broker sells a patent into a large network of potential buyers--the lack of transparency can result in a higher final price because the participants know who has been offered the patent but not the amount offered. A further possible downside to a public auction is that one can only sell his patent to someone who shows up at the auction. With a broker-conducted private auction, however, someone who may not actively be seeking to buy a patent at that time will be presented with the opportunity to buy the patent. Thus, the number of potential buyers can be expanded with the use of a patent broker.
It's as Clear as Mud Now, Right?
As noted at the outset of this article, the patent monetization market is only just now emerging as a viable way to obtain value from un- or under-utilized patent assets. In view of this, most patent owners just starting into will be confused about how to proceed in a manner that maximizes the price obtained from one's patent. If one owns patent rights and seeks to sell them today, it is my recommendation that he learn as much as possible about the process. And, as with many business situations, checking references and seeking recommendations from those with experience as patent sellers and counselors to patent owners will be critical to success in patent monetization. Personally, I am looking forward to the day when more openness exists in the patent marketplace so that patent owners can better gauge the quality and qualifications of those participants in the process. I think we are getting there, and I will provide more information on this in a subsequent blog post.
Friday, March 20, 2009
Thursday, March 12, 2009
How a Patent Strategy Focused Only on Obtaining the Lowest Cost Patents May Reveal a Company's Future Inability to Remain Viable
Commentators like me frequently rail against what we view as the often unnecessarily high cost of obtaining patent protection. In truth, many patents are overpriced and provide questionable business value to their clients. Over-priced patents do not form the basis of this article, however. Instead, this is about the opposite phenomenon, i.e., under-priced patents. Specifically, in this article, I describe a company's desire to obtain low cost patents and what such a patent strategy may reveal about its long term viability.
I was recently contacted by a large printer manufacturer ("PrinterCo" for the purposes of this discussion) to see whether I was interested in preparing patent applications for the price of $1300 each. This price seemed somewhat ridiculous to me because even the most "bargain basement" patent preparation prices that pop up on my Google sidebar advertising do not seem to dip beneath a threshold level of $2800. And, as a high level chemical patent prosecution attorney, I routinely drafted patent applications that cost $15K or more in 2005. PrinterCo's desire to obtain patent applications for $1300 thus both surprised and intrigued me, and I wanted to learn more about what type of patent application its management sought for this price.
That PrinterCo was seeking to obtain patent drafting services at a lower price than I would expect might be explainable because many IP strategy savvy companies seek to maximize their freedom to operate by filing patent applications that they never intend to see through to issuance. This "publish and abandon" approach can effectively prevent others from obtaining patent rights that can block a company like PrinterCo from freely developing products in a particular technology area. However, because these patent applications are not drafted with the intent to issue, the filing company will not end up with enforceable rights. Nonetheless, "freedom to operate" afforded by publishing and abandoning applications addressing a relevant technology can serve as a valuable right in itself. It thus made sense to me that PrinterCo might seek to file a large number of patent applications to strategically prevent other companies from patenting in its technology space.
A "freedom to operate" patent application can certainly be prepared in about 8-10 hours by someone with a few years of experience. Therefore, $1300 would not result in a terribly low hourly rate for someone working out of his home with little or no overhead. "Freedom to operate" is all that can reasonably be expected in this time, however, because even the most experienced person requires time to understand the invention to be claimed and to properly draft claims that will avoid the prior art. Indeed, because it takes time to read prior art references, one cannot understand the relevant prior art in a total of 8-10 hours, especially in crowded areas such as printer, ink and cartridge technology relevant to PrinterCo's business.
Fully expecting the $1300 to apply to such a freedom to operate strategy, I was quite honestly shocked to find out that PrinterCo fully intended to see patent applications drafted for this price through to issuance. Furthermore, PrinterCo's managing patent attorney stated that he expected to obtain patents from this process that could be the subject of future litigation. After hearing this strategy, I politely declined PrinterCo's proposal and wished the attorney farewell, as I saw no way I could ethically meet PrinterCo's objectives.
Frankly, even if PrinterCo had wanted me to prepare "freedom to operate" patent applications for $1300, I likely would not have done so. I was actually more interested in learning about this company's patent strategy in view of this ridiculously low price. And, now that I know, it appears clear that PrinterCo is pursuing a short-term cost reduction strategy directed toward allowing it current management to meet cost cutting goals, at the expense of the long term asset value of the company. Let me explain what I mean by this. . . .
Critically, such a business strategy requires any patents covering the ink and cartridge refills be skillfully drafted such that the claimed invention cannot easily be designed around without the copier also incurring of patent infringement liability. Moreover, the profit margins involved in printer ink cartridge refill sales are such that third parties will clamour to knock-off refills for any top selling printer or scanner if the underlying patent protection is weak. If PrinterCo or its competitors now abandon their aggressive patenting strategies, competitors will certainly see an opportunity to introduce knock-off ink and cartridge refills, and erosion of their profit margins will invariably occur.
Other than making PrinterCo's current legal management look effective in cutting legal budgets in today's economic climate, I cannot fathom why this company is trying to lower its patent application costs to the ridiculously low price of $1300. PrinterCo's ability to maintain its profit margins depends on its obtaining strong patent rights. A substantial aspect of PrinterCo's corporate asset value lies in its ability to prevent others from knocking off its printer catridge ink refills. In other words, PrinterCo's patent strategy serves as the foundation for the company's ability to execute on its business strategy. It is thus nothing short of idiotic for PrinterCo to allow its legal managers to treat its patent application drafting processes as vehicles for cost control, where the motivation for the reduction in patent costs is certainly the legal staff's meeting of their cost cutting objectives.
Put simply, PrinterCo's corporate asset value is jeopardized by its legal managers self-serving objective to lower the company's patent costs. If PrinterCo continues to pursue this low cost patent application strategy, I predict that its cartridge ink refill business will quickly become commoditized as a result of low cost, non-infringing competitive knock offs. And, since the public expects PrinterCo's printers, scanners etc. to be low priced, there will be little ability for the company to obtain premium margins on its product lines. In short, PrinterCo quite likely might find it difficult to remain viable in the coming years due to its current short-sighted patent strategy. Hopefully, PrinterCo's management, both legal and otherwise, are still around when shareholders realize that the company's patent strategy has resulted in the company no longer being a viable specialty products company. I would love to see them held accountable for such mis-management.
I was recently contacted by a large printer manufacturer ("PrinterCo" for the purposes of this discussion) to see whether I was interested in preparing patent applications for the price of $1300 each. This price seemed somewhat ridiculous to me because even the most "bargain basement" patent preparation prices that pop up on my Google sidebar advertising do not seem to dip beneath a threshold level of $2800. And, as a high level chemical patent prosecution attorney, I routinely drafted patent applications that cost $15K or more in 2005. PrinterCo's desire to obtain patent applications for $1300 thus both surprised and intrigued me, and I wanted to learn more about what type of patent application its management sought for this price.
That PrinterCo was seeking to obtain patent drafting services at a lower price than I would expect might be explainable because many IP strategy savvy companies seek to maximize their freedom to operate by filing patent applications that they never intend to see through to issuance. This "publish and abandon" approach can effectively prevent others from obtaining patent rights that can block a company like PrinterCo from freely developing products in a particular technology area. However, because these patent applications are not drafted with the intent to issue, the filing company will not end up with enforceable rights. Nonetheless, "freedom to operate" afforded by publishing and abandoning applications addressing a relevant technology can serve as a valuable right in itself. It thus made sense to me that PrinterCo might seek to file a large number of patent applications to strategically prevent other companies from patenting in its technology space.
A "freedom to operate" patent application can certainly be prepared in about 8-10 hours by someone with a few years of experience. Therefore, $1300 would not result in a terribly low hourly rate for someone working out of his home with little or no overhead. "Freedom to operate" is all that can reasonably be expected in this time, however, because even the most experienced person requires time to understand the invention to be claimed and to properly draft claims that will avoid the prior art. Indeed, because it takes time to read prior art references, one cannot understand the relevant prior art in a total of 8-10 hours, especially in crowded areas such as printer, ink and cartridge technology relevant to PrinterCo's business.
Fully expecting the $1300 to apply to such a freedom to operate strategy, I was quite honestly shocked to find out that PrinterCo fully intended to see patent applications drafted for this price through to issuance. Furthermore, PrinterCo's managing patent attorney stated that he expected to obtain patents from this process that could be the subject of future litigation. After hearing this strategy, I politely declined PrinterCo's proposal and wished the attorney farewell, as I saw no way I could ethically meet PrinterCo's objectives.
Frankly, even if PrinterCo had wanted me to prepare "freedom to operate" patent applications for $1300, I likely would not have done so. I was actually more interested in learning about this company's patent strategy in view of this ridiculously low price. And, now that I know, it appears clear that PrinterCo is pursuing a short-term cost reduction strategy directed toward allowing it current management to meet cost cutting goals, at the expense of the long term asset value of the company. Let me explain what I mean by this. . . .
For the last several years, printer companies have engaged in aggressive patenting strategies that effectively require printer users to purchase ink refills exclusively from them. Companies such as PrinterCo likely lose money on printers, scanners, etc., but make huge profits on patented ink cartridge refills that work only in their proprietary equipment. (In 2008, it was estimated that printer ink costs from $3K to $5K per gallon.) Moreover, these companies have undertaken expensive patent litigation directed to preventing third parties from selling "generic" printer ink refills.
Critically, such a business strategy requires any patents covering the ink and cartridge refills be skillfully drafted such that the claimed invention cannot easily be designed around without the copier also incurring of patent infringement liability. Moreover, the profit margins involved in printer ink cartridge refill sales are such that third parties will clamour to knock-off refills for any top selling printer or scanner if the underlying patent protection is weak. If PrinterCo or its competitors now abandon their aggressive patenting strategies, competitors will certainly see an opportunity to introduce knock-off ink and cartridge refills, and erosion of their profit margins will invariably occur.
Other than making PrinterCo's current legal management look effective in cutting legal budgets in today's economic climate, I cannot fathom why this company is trying to lower its patent application costs to the ridiculously low price of $1300. PrinterCo's ability to maintain its profit margins depends on its obtaining strong patent rights. A substantial aspect of PrinterCo's corporate asset value lies in its ability to prevent others from knocking off its printer catridge ink refills. In other words, PrinterCo's patent strategy serves as the foundation for the company's ability to execute on its business strategy. It is thus nothing short of idiotic for PrinterCo to allow its legal managers to treat its patent application drafting processes as vehicles for cost control, where the motivation for the reduction in patent costs is certainly the legal staff's meeting of their cost cutting objectives.
Put simply, PrinterCo's corporate asset value is jeopardized by its legal managers self-serving objective to lower the company's patent costs. If PrinterCo continues to pursue this low cost patent application strategy, I predict that its cartridge ink refill business will quickly become commoditized as a result of low cost, non-infringing competitive knock offs. And, since the public expects PrinterCo's printers, scanners etc. to be low priced, there will be little ability for the company to obtain premium margins on its product lines. In short, PrinterCo quite likely might find it difficult to remain viable in the coming years due to its current short-sighted patent strategy. Hopefully, PrinterCo's management, both legal and otherwise, are still around when shareholders realize that the company's patent strategy has resulted in the company no longer being a viable specialty products company. I would love to see them held accountable for such mis-management.
Monday, March 2, 2009
Confessions of a Reluctant Convert to Electronic Patent File Management Systems & Why I Am Now a True Believer
For many years, vendors of office automation systems expended considerable effort trying to convince corporate and law firm patent attorneys to adopt paperless file management systems by touting the time and money savings associated with electronic files over the traditional patent file system. However, relatively few patent attorneys have done so, instead, remaining loyal to the traditional three-sided manila patent file folder. Until recently I was one of those patent attorneys. Now that I have discovered the vast efficiencies and improvements possible with these electronic systems, the question is why I remained true to this clearly outdated system of maintaining client patent prosecution records.
Given the remarkable efficiency and knowledge management improvements possible with electronic patent file management systems, there can be no viable excuse for either corporate or law firm patent attorneys not to adopt such systems.In retrospect, I think I found that the heft and history represented by the partially filled patent file folder provided a feeling of ongoing accomplishment, even while I was contesting yet another trivial rejection from a patent examiner. The need for a tangible sign of my efforts prevailed over the backaches that I incurred from carrying multiple patent files to work on outside of the office. However, after being faced head-on with the administrative inefficiencies of the traditional paper-based patent file management systems, I am now a convert to the undeniable benefits of electronic patent file systems.
Put simply, given the remarkable efficiency and knowledge management improvements possible with electronic patent file management systems, there can be no viable excuse for either corporate or law firm patent attorneys not to adopt such systems. When viewed in the best light, patent attorneys who decline to adopt an electronic system are doing their clients and themselves a disservice. Viewed in the harshest light, these attorneys are unintentionally cheating their clients out of innovative methods that improve the quality of patent legal service while reducing its cost.
My Awakening
My awakening to the value of electronic patent file management systems occurred recently while leading a team of patent prosecution experts for an Intellectual Asset Management (IAM) enterprise software vendor. For this project, my team conducted a detailed time comparison between a fully electronic patent file management system and a traditional paper-based system. By assigning times to each of the administrative steps involved in eleven common patent prosecution tasks, we discovered that use of an electronic patent file management system markedly reduced the amount of administrative time involved. Specifically, the amount of administrative time (as opposed to substantive legal effort) required for each task was reduced from roughly 60 percent to as much as 85 percent, depending on the prosecution matter. These administrative tasks represented functions such as pulling and moving files from office to office, uploading, retrieving and saving documents into department computer databases and inefficient communication between in-house personnel and outside counsel.
Adoption of an electronic patent file management system can save anywhere from $150K to $220K per year.Our analysis demonstrated that for a fully staffed corporate patent department (e.g., docket clerk, paralegal and attorneys) that files about fifty patent applications and engages outside counsel for patent preparation and prosecution, adoption of an electronic patent file management system can save anywhere from $150K to $220K per year (see the Appendix). For a fully staffed corporate patent department filing a similar number of patents but which handles patent prosecution matters primarily in-house, the cost savings range from $50 to $75K per year. Because the tasks eliminated by an electronic patent file management system are repetitive and routine, these savings are fully scalable to organizations with higher or lower filing levels.
Further cost savings will also follow from a corporate patent department’s adoption of an electronic patent file management system because having the appropriate documents readily at hand in electronic form greatly increases communication efficiency between patent staff and internal business clients regarding their patent matters.
For example, while employed as a senior IP attorney at a multinational corporation, I conducted periodic patent committee meetings with my business and R&D teams. To collect and present the information necessary for the teams to make informed decisions, the paralegal and administrative staff were required to spend considerable effort copying, sorting and binding relevant patent documentation. Moreover, because the information in the thick binders stayed static, while the relevant patent matters did not, these binders became obsolete as soon as the periodic meetings ended. The binders therefore needed to be re-created from scratch for every meeting. Multiply this effort over multiple businesses, each with frequently changing patent filings, and one can see how much work was required to keep my business and R&D teams up to date about their patent portfolios.
Had the management of my corporate IP legal department invested in an electronic patent file management system, countless paralegal hours (and reams of paper) would have been saved by providing the same information to my organization’s business team for review on their laptop computers. With an electronic system, our department’s staff could have avoided the repeated pulling of patent files to copy relevant documents and prepare binders. The time-intensive nature of patent committee preparation alone would have justified the adoption of an electronic filing system.
Information to the Right People at the Right Time
A further, perhaps immeasurable, benefit of electronic patent file management results from the greatly improved access to valuable corporate patent asset information.
With traditional, paper-based patent file management systems, patent staff necessarily controls access to patent information. Those with important business interests in a corporation’s patent matters—that is, business and R&D teams--must first ask their patent staff for permission to access such information. For organizations where patents are recognized as valuable corporate assets, the requirement is like needing to ask your banker for your bank balance. For those responsible for managing corporate assets, such limited access to information is unacceptable.
No More Gatekeepers
When a corporation views its patents as assets, those responsible for managing corporate assets must be able to readily access relevant information.An electronic patent file management system is a critical component for those managers seeking to better capture and protect their intellectual property. When a corporation views its patents as assets (as opposed to legal instruments); those responsible for managing those assets must have ready access to relevant information. Under traditional paper-based patent filing systems, patent staff serves as gatekeepers of the information for the entire corporation. With an electronic patent file management system, those with a need-to-know can be granted access to the patent information on an as-needed basis. This reduces the workload of the patent staff and improves the engagement of others in the organization with the patent process.
Managing the Cost of Transition
Given the large cost savings, increased efficiencies, and greatly improved corporate knowledge management possible with adoption of an electronic patent file management system, there would seem to be little reason for corporate patent departments to retain the traditional method of managing patent documentation. Of course, the task of scanning active patent files into electronic form may seem daunting. But there are ways to minimize the entry-level cost.
First, technology makes it easier to go paperless than ever before. Most organizations already file patent applications and other patent documents electronically. This means that most patent documents are present in electronic form and do not need to be separately scanned into an electronic file. In the next several months, the US Patent Office will be introducing electronic Office Action reporting, to be followed later by electronic reporting for other official documents.
The effective elimination of paper from communications to and from the US Patent Office today will make it easier for forward-thinking organizations to eliminate paper-based patent file management systems. When combined with modern document management systems typically in place at corporate and law firm settings, most organizations will be able to convert to electronic patent file management systems today for a reasonable price and with minimal effort
To further reduce the entry-level cost, legal managers can select only currently pending applications for entry into a new electronic patent file management system. Of course, newly docketed matters should also be made fully electronic from their inception. Issued cases can later be added to the system if time and resources allow. By taking a measured approach to the adoption of an electronic patent file management system, the cost of moving from a paper-based file management system to an all-electronic patent management system can be minimized.
The Role of Outside Counsel
Outside counsel saves money by electronically communicating with clients, and it is inexcusable for them not to pass such savings on to their clients.Corporate patent managers should expect their outside counsel to be willing to provide them with electronic patent-related communications on a low- or no-cost basis. Corporate patent managers should also be prepared to discuss with their outside counsel where inefficiencies can be removed from law firm operations and communications to reduce overall patent procurement costs. If an outside counsel wants to charge a client additional fees for electronic communications, the client should seriously consider vetting new patent counsel who is more willing to adopt innovative solutions. Outside counsel saves money by communicating electronically with clients, and it is inexcusable for them not to pass such savings onto their clients.
It's Time for All IP Departments to Adopt an Electronic IP Management System
Although we represent technology savvy companies, patent attorneys often are somewhat resistant to change. This conservative nature could explain why, to date, conversion to electronic patent file management systems has been slow. With the remarkable efficiencies and improvements over traditional paper-based patent file management systems more and more evident, however, there is no reason for patent attorneys not to adopt electronic patent file management systems today.
Given the remarkable efficiency and knowledge management improvements possible with electronic patent file management systems, there can be no viable excuse for either corporate or law firm patent attorneys not to adopt such systems.In retrospect, I think I found that the heft and history represented by the partially filled patent file folder provided a feeling of ongoing accomplishment, even while I was contesting yet another trivial rejection from a patent examiner. The need for a tangible sign of my efforts prevailed over the backaches that I incurred from carrying multiple patent files to work on outside of the office. However, after being faced head-on with the administrative inefficiencies of the traditional paper-based patent file management systems, I am now a convert to the undeniable benefits of electronic patent file systems.
Put simply, given the remarkable efficiency and knowledge management improvements possible with electronic patent file management systems, there can be no viable excuse for either corporate or law firm patent attorneys not to adopt such systems. When viewed in the best light, patent attorneys who decline to adopt an electronic system are doing their clients and themselves a disservice. Viewed in the harshest light, these attorneys are unintentionally cheating their clients out of innovative methods that improve the quality of patent legal service while reducing its cost.
My Awakening
My awakening to the value of electronic patent file management systems occurred recently while leading a team of patent prosecution experts for an Intellectual Asset Management (IAM) enterprise software vendor. For this project, my team conducted a detailed time comparison between a fully electronic patent file management system and a traditional paper-based system. By assigning times to each of the administrative steps involved in eleven common patent prosecution tasks, we discovered that use of an electronic patent file management system markedly reduced the amount of administrative time involved. Specifically, the amount of administrative time (as opposed to substantive legal effort) required for each task was reduced from roughly 60 percent to as much as 85 percent, depending on the prosecution matter. These administrative tasks represented functions such as pulling and moving files from office to office, uploading, retrieving and saving documents into department computer databases and inefficient communication between in-house personnel and outside counsel.
Adoption of an electronic patent file management system can save anywhere from $150K to $220K per year.Our analysis demonstrated that for a fully staffed corporate patent department (e.g., docket clerk, paralegal and attorneys) that files about fifty patent applications and engages outside counsel for patent preparation and prosecution, adoption of an electronic patent file management system can save anywhere from $150K to $220K per year (see the Appendix). For a fully staffed corporate patent department filing a similar number of patents but which handles patent prosecution matters primarily in-house, the cost savings range from $50 to $75K per year. Because the tasks eliminated by an electronic patent file management system are repetitive and routine, these savings are fully scalable to organizations with higher or lower filing levels.
Further cost savings will also follow from a corporate patent department’s adoption of an electronic patent file management system because having the appropriate documents readily at hand in electronic form greatly increases communication efficiency between patent staff and internal business clients regarding their patent matters.
For example, while employed as a senior IP attorney at a multinational corporation, I conducted periodic patent committee meetings with my business and R&D teams. To collect and present the information necessary for the teams to make informed decisions, the paralegal and administrative staff were required to spend considerable effort copying, sorting and binding relevant patent documentation. Moreover, because the information in the thick binders stayed static, while the relevant patent matters did not, these binders became obsolete as soon as the periodic meetings ended. The binders therefore needed to be re-created from scratch for every meeting. Multiply this effort over multiple businesses, each with frequently changing patent filings, and one can see how much work was required to keep my business and R&D teams up to date about their patent portfolios.
Had the management of my corporate IP legal department invested in an electronic patent file management system, countless paralegal hours (and reams of paper) would have been saved by providing the same information to my organization’s business team for review on their laptop computers. With an electronic system, our department’s staff could have avoided the repeated pulling of patent files to copy relevant documents and prepare binders. The time-intensive nature of patent committee preparation alone would have justified the adoption of an electronic filing system.
Information to the Right People at the Right Time
A further, perhaps immeasurable, benefit of electronic patent file management results from the greatly improved access to valuable corporate patent asset information.
With traditional, paper-based patent file management systems, patent staff necessarily controls access to patent information. Those with important business interests in a corporation’s patent matters—that is, business and R&D teams--must first ask their patent staff for permission to access such information. For organizations where patents are recognized as valuable corporate assets, the requirement is like needing to ask your banker for your bank balance. For those responsible for managing corporate assets, such limited access to information is unacceptable.
No More Gatekeepers
When a corporation views its patents as assets, those responsible for managing corporate assets must be able to readily access relevant information.An electronic patent file management system is a critical component for those managers seeking to better capture and protect their intellectual property. When a corporation views its patents as assets (as opposed to legal instruments); those responsible for managing those assets must have ready access to relevant information. Under traditional paper-based patent filing systems, patent staff serves as gatekeepers of the information for the entire corporation. With an electronic patent file management system, those with a need-to-know can be granted access to the patent information on an as-needed basis. This reduces the workload of the patent staff and improves the engagement of others in the organization with the patent process.
Managing the Cost of Transition
Given the large cost savings, increased efficiencies, and greatly improved corporate knowledge management possible with adoption of an electronic patent file management system, there would seem to be little reason for corporate patent departments to retain the traditional method of managing patent documentation. Of course, the task of scanning active patent files into electronic form may seem daunting. But there are ways to minimize the entry-level cost.
First, technology makes it easier to go paperless than ever before. Most organizations already file patent applications and other patent documents electronically. This means that most patent documents are present in electronic form and do not need to be separately scanned into an electronic file. In the next several months, the US Patent Office will be introducing electronic Office Action reporting, to be followed later by electronic reporting for other official documents.
The effective elimination of paper from communications to and from the US Patent Office today will make it easier for forward-thinking organizations to eliminate paper-based patent file management systems. When combined with modern document management systems typically in place at corporate and law firm settings, most organizations will be able to convert to electronic patent file management systems today for a reasonable price and with minimal effort
To further reduce the entry-level cost, legal managers can select only currently pending applications for entry into a new electronic patent file management system. Of course, newly docketed matters should also be made fully electronic from their inception. Issued cases can later be added to the system if time and resources allow. By taking a measured approach to the adoption of an electronic patent file management system, the cost of moving from a paper-based file management system to an all-electronic patent management system can be minimized.
The Role of Outside Counsel
Outside counsel saves money by electronically communicating with clients, and it is inexcusable for them not to pass such savings on to their clients.Corporate patent managers should expect their outside counsel to be willing to provide them with electronic patent-related communications on a low- or no-cost basis. Corporate patent managers should also be prepared to discuss with their outside counsel where inefficiencies can be removed from law firm operations and communications to reduce overall patent procurement costs. If an outside counsel wants to charge a client additional fees for electronic communications, the client should seriously consider vetting new patent counsel who is more willing to adopt innovative solutions. Outside counsel saves money by communicating electronically with clients, and it is inexcusable for them not to pass such savings onto their clients.
It's Time for All IP Departments to Adopt an Electronic IP Management System
Although we represent technology savvy companies, patent attorneys often are somewhat resistant to change. This conservative nature could explain why, to date, conversion to electronic patent file management systems has been slow. With the remarkable efficiencies and improvements over traditional paper-based patent file management systems more and more evident, however, there is no reason for patent attorneys not to adopt electronic patent file management systems today.
Subscribe to:
Posts (Atom)
Posts
