Jack Ellis

Back in July, this blog reported on research from Ocean Tomo – published in issue 73 of IAM magazine – looking into abandonment rates of USPTO and EPO awarded patents. Among other datapoints, the feature listed the top 10 companies for each of the two by the number of patent assets they had abandoned over the previous 10 years.

Unsurprisingly, those corporates that are typically renowned for their high-volume patenting strategies were also among those that allowed the greatest numbers of their patents to lapse. Leading the pack in the United States is IBM, which abandoned 3,064 patents in 2014 (for comparison, it was granted 7,481 patents by the USPTO over the course of the year). The compound annual growth rate of IBM’s abandonments since 2005 is 13.9%, putting it in fourth position behind South Korea’s Samsung Electronics (32.6%), and Japanese companies Fujifilm (20.2%) and Toshiba (14.4%).

With patent quality now a major discussion point, I suggested at the time that those companies which file the most patents – and subsequently abandon the most – may have some questions to answer with regards to any potential negative impact that this approach to portfolio management might have on the workload and output of issuing agencies.

To get the alternative perspective, I recently spoke via email to IBM’s chief patent counsel Manny Schecter (MS) and senior counsel for IP policy and strategy Marian Underweiser (MU). They explained the decision-making processes behind abandoning patents and also argued that abandonments can actually contribute to, rather than jeopardise, the pursuit of high quality in the patent system.

IBM has abandoned more US patent rights than any other entity in nine out of the past 10 years. Why is this?

MS: Timely pruning of assets is a strategic approach to managing a large patent portfolio.   IBM has received more US patents than any other entity in all 10 of those years, so since IBM has more patents that can be abandoned it is not surprising that IBM would abandon more patents.  

If one could make estimates about how many patents will eventually be abandoned – for example, based on past abandonment rates – then why file so many applications in the first place? Is it not the case that some of these applications should not be filed at all, if there is a heightened likelihood that they will be abandoned?

MS: The value of an individual invention is very often difficult to predict at the time of filing. Thus, historic abandonment rates indicate little about which patents will later prove to be valuable and which patents might eventually be abandoned because they are not valuable enough to maintain. We obtain many patents and then over time abandon those which we determine to have the least value as the relevant marketplaces mature.

MU: In our industry, individual inventions may have different lifecycles – in other words, they may be immediately valuable or have delayed implementation, and they may be used for a long time in the industry or only a short time. Our patent system provides the flexibility to choose whether or not to maintain a patent at multiple times during its full available term, of 20 years from priority date, so that patentees don’t need to invest in the full term for inventions that prove to be less valuable or were only valuable for a short time. 

In the long term, would you say it is more efficient – both for the patent owner themselves, and for the wider patent ecosystem – to file an application that later is abandoned, or to not file an application in the first place?

MS: It would be more efficient to not file an application in the first place – if one could be certain that an application will have little value while in force and later be abandoned.  Because of the uncertainty regarding how marketplaces will develop, multiple applications increase the likelihood of receipt of patents of significant value.  And as noted above, an invention may have a short lifetime in which case it may be valuable immediately after issuance, but it may nevertheless make sense to abandon it later.

In our original blog, we inferred that the high volume of applications coming from major filers such as IBM could be impacting on the overall quality of the output at patent offices. Do you think this is the case, and do you believe that there is any link between patent abandonments and patent quality more generally?

MS: Your question would be best put to the patent offices. We cannot comment knowledgeably on patent offices’ capability to adjust to their changing patent application pipelines. However, the quality of output at patent offices depends on many factors and, at least in the United States, the USPTO is funded solely from user fees, including significant amounts paid by IBM, which are adjusted periodically to ensure sufficient resource.

MU: We must distinguish between value and validity.  It is not within the USPTO’s charter to evaluate value, ie, to the extent it is relevant to commercial popularity for example. The USPTO’s role is to issue valid patents. Whether patents end up being used later in commercial products is something the USPTO does not and should not concern itself with. The laws governing the procurement of patents force inventors to file promptly when an invention is created, especially under the America Invents Act. Inventors really need to file promptly - likely before they know the true commercial value of the invention. 

At what stage in their lifecycle do the majority of IBM’s abandoned patents actually get abandoned? Does this tell us anything about the reasons for their abandonment?

MS: We review the value of our patents throughout their lifecycle. Keep in mind that given the significant costs to maintain patents, especially as they get farther from issuance, it should be expected that patents that have not proven to be commercially valuable will be abandoned.

How do you come to decisions about which patent assets should be abandoned before the end of their lifetime?

MS: We review our patents for all of the factors you would expect – the size of the relevant marketplace for the patent inventions, competitors in the marketplace, and so on. 

Some observers will draw the conclusion that high patent abandonment rates are suggestive that the patent system as a whole is of questionable value (ie, why do well-capitalised companies spend money on filing so many patents that they eventually abandon, while smaller businesses struggle to find the money to file, maintain and enforce a single patent). What is your response to this?

MS: Those observers need to recognise the realities of market uncertainty – one cannot always know the value of a patent at the time of patent application filing or even patent issuance.  Those uncertainties vary by technology and industry, too.  We are more than an observer – we are an actual participant in the patent system. Your earlier questions suggest we have a high abandonment rate, but yet we fully support strong patent protection.

MU: It is understood that patented inventions may have limited lifetimes and that there is natural speculation involved when filing patent applications as to which patents will turn out to be valuable enough to maintain. This is why patent systems worldwide include features like the system in the United States, with a requirement to periodically pay maintenance fees to keep issued patents in force. Abandonment is thus a common and desirable aspect of patent systems, incorporating the flexibility needed to reflect advances in innovation in the marketplace.