IP value and the venn of effective patent claims

During the expansionist period of the United States, any male citizen could claim unowned land for himself. But not all claims were created equal – for example, the claimed land had different levels of merit according to whether it was in use and whether the claimant improved the land and lived on it. Similarly, in that period a mining claim was made with claim boundaries, typically wooden posts. Such mining claims always started out as an "unpatented claim" (the actual terminology used). The owner of an unpatented claim had to begin mining or exploration activities to prevent it being lost. If the miner could prove that the mined land might be operated profitably, the government would award the miner a patent (deed) for the land. This type of patented claim could be used for any purpose desired by the owner.

Like miners in the Wild West, patent attorneys today generally attempt to peg out the largest area around an invention. The invention is defined by patent claims. As with land claims, not all patent claims are created equal. There are three quite distinct lenses through which patent claims can be viewed, and high-quality claims are constructed with all three lenses in mind.

The first of these lenses is claim scope. A claim desirably includes within its scope the intended commercial embodiment of the invention. The claim scope is intended to:

• protect the patent owner’s invention from being copied and designed around; and
• be as broad as possible in order to embrace further and potentially unexpected commercial opportunities.

The second lens is validity. In order to be valid, a claim must reach a certain threshold of patentability. One requirement is that the subject matter of the claim is new. The claim scope is usually limited by prior art and its interpretation by patent offices. The validity of claims can be challenged after the patent has been granted.

The final lens is enforcement. This is a legal view of how any future patent enforcement proceedings would fare in court. While issues of validity are a consideration, other factors come into play such as the ease of detecting and enforcing infringement.

In the venn diagram below, the desired bullseye is area 7, where the patent claims satisfy all three lenses: claim scope, validity and enforcement.

Patents in the following areas are one-dimensional and subsequently weak:

• Area 1 – claims appear valid, but infringement is hard to detect and the claim scope is not commercially useful.
• Area 2 – infringement is easy to detect and enforce, but claim scope is commercially poor and claims are likely to be invalid.
• Area 3 – claim scope is good, but the claims are likely to be invalid and infringement is difficult to detect.

Patents in the following areas look good through two lenses:

• Area 4 – claims appear valid and easy to enforce, but are easy to design around.
• Area 5 – claims have good scope and it is easy to detect infringement, but they are likely to be invalid.
• Area 6 – claims appear valid and have good scope, but infringement is hard to detect.

Does a bullseye equate to high patent value? Not necessarily.

It takes more than effective patent claims to generate value
A number of economic lenses determine whether a well-constructed patent is valuable:

• Commercial utility lens – in addition to being novel, the invention must have greater commercial utility than alternatives. Usefulness is not enough. It must be accompanied by economic benefits, either incremental demand or cost savings.  
• Market lens – the value equation is also influenced by the attractiveness of the market in which the invention is used. Market size, growth and profitability magnify or diminish the benefits of a well-drafted patent.
• Economic life lens – it is unsurprising that the expected economic life of a patent has a direct impact on its value. Economic life is a function of the patent’s remaining legal life, the quality of the patent claims and the pace of change in the relevant area of technology.
• Path-to-market lens – remaining development hurdles diminish value by reducing the probability of the technology reaching the market. The present value of future earnings is further discounted by the length of time before commercialisation. Alternative commercialisation strategies can mitigate risk and increase the speed to market.

Applying multiple lenses to innovation and patenting
Three lenses are required to draft quality patents. However, several economic lenses are also required to assess innovation pathways and IP strategy. Well-constructed scenario valuation models and IP dashboards integrate all relevant perspectives, and help maximise the value of R&D and intellectual property.

There is little point in precisely staking a claim if you have selected a barren piece of land.