Patent Law

Buy

By Gary Odom and Jordan Kuhn

According to a recent poll of  small and mid-sized computer technology companies, 64% were interested in buying patents this year, up from a trough of 32% last year. Of those responding with interest in acquisition, 39% reported as planning to buy, with 25% considering the possibility. The first hurdle is quality assessment and valuation.

Law360 reported that many large corporations are extending their internal R&D by enlarging their patent acquisition budgets. Patents can galvanize product development, and even jump-start a new product line, all the while with at least some assurance that a strong patent portfolio builds a fence around competitors adopting the same technology.

As maintenance fees add up, companies often shed patents from their portfolio that lack relevance to their current business model. With the deep recession well underway, struggling companies are increasing keen to cash out their patents to stay afloat.

A major obstacle in the process is vetting patents. Most patents are worthless. It takes a validity specialist, someone steeped in patent litigation, knowing the business of patents, and preferably an economist, to properly assess whether a patent will withstand the gauntlet of litigation and be enforceable. Patent Hawk has performed this service for its clients for years. Patent Hawk founder Gary Odom:

Many patents that, at first glance, look like an edifice of protection are really a house of cards.

Examination in the 1990s was quite lax. That's where the "junk patent" mantra came from: patents from the '90s.

Even in the past few years, with allowance rates dropping, patent office examiners aren't doing a better job of granting valid patents. Political pressure and mismanagement have yielded an illusion of improved quality. Examiner prior art search is marginally better than it has been in the past, because the PTO databases have improved. But it takes skill, and time, to find and map prior art to claims. Examiners are as slipshod as ever. It shows in the file histories.

Patent Hawk's bread-and-butter business is as a patent killer. We handle dozens of litigations a year, and solidly invalidate better than the majority of patents we're assigned. Not just prior art, though that is the bulk of the validity problem. §112 problems are not unusual. The recent §101 rulings, especially Bilski, have added a twist to gauging validity, particularly for method claims.

For a few thousand dollars, we give our clients a good read on a patent's enforcement prospects. With a broader technological assessment, I'm able to judge how valuable a claimed technology might be. Valuation is a black art, and the parameters for valuation vary depending on the technology and market. Having experience as an economist has helped me develop valuation models that make business sense.

The recent poll was taken at a recent IP symposium in Silicon Valley.

Full post as published by The Patent Prospector on April 23, 2009 (boomark / email).