IAM benchmarking survey 2015

The global IP market is changing at a rapid pace. This is reflected in the findings of IAM’s latest benchmarking surveys, which record the views of market makers across the world

The IP landscape has altered significantly since IAM last conducted a benchmarking survey back in 2012. The United States has witnessed the introduction and implementation of the America Invents Act; while in Europe, progress towards an EU patent and Unified Patent Court (UPC) is being made. Three years ago, the market for patents was buoyant; today, that is rather less the case – at least in the United States.

But as important as it is to report on these and other developments, of equal importance is capturing the views that those on the ground take of what is happening. So, for five weeks between the middle of February and late March 2015, IAM conducted a survey with the aim of discovering what our readership thinks about a range of subjects, including:

  • overall corporate awareness of IP issues;
  • the relationship between NPEs and operating companies;
  • patent values and valuation;
  • performance of leading patent offices;
  • leading jurisdictions for litigation;
  • the potential impact of a unified EU patent system;
  • the reform process in the United States; and
  • the biggest threats to IP value creation.

To understand how readers’ opinions differ depending on their position in the IP ecosystem, we created three bespoke surveys, each tailored to a specific demographic. The first was for those managing IP portfolios in operating companies; the second was for non-practising entities (NPEs); and the third was for private practice lawyers and attorneys. Clearly, these categories do not cover everyone who reads IAM, but we had to draw the line somewhere!

We received more than 650 responses, primarily from individuals holding senior positions. All respondents were guaranteed full confidentiality. Over the following pages we have selected many of the most interesting of the findings and broken them down into the following categories:

  • demographic;
  • IP management;
  • the market;
  • quality and procurement;
  • litigation;
  • the EU patent and UPC;
  • US patent reform; and
  • threats.

In each area we look primarily at the responses from operating company respondents and compare them with those of their NPE and private practice counterparts. Some of the results may well be unexpected, but what will come as no surprise is that an individual’s opinion on the IP market is heavily influenced by his or her position in it.

Perspective is everything; and with that in mind, remember, too, that this is an audience of IAM readers – we would expect them to be more sophisticated than average in their IP outlook. 

Demographic

Figure 1. Your job title (operating company)

Figure 2. Your job title (NPE)

Figure 3. Your job title (private practice)

Figure 4. In which industry does your company operate? (operating company)

Figure 5. Your office location (operating company)

Figure 6. Your office location (NPE)

Figure 7. Your office location (private practice)

IP management

Table 1.Rank the top three most important IP issues affecting your work (with one being the most important) (operating company)

 Weighted average
Finding ways to make money from your intellectual property1.71
Managing the rights you own1.81
Protecting your portfolio1.9
Lack of executive management support1.97
Managing costs1.99
Tracking inventions2.02
Enforcing the rights you have2.12
Assessing out-licensing opportunities2.24
Doing IP due diligence in light of M&A2.28
Staffing2.33
Assessing in-licensing opportunities2.42

Finding ways to make money from the assets they look after is the primary challenge facing IP managers in operating companies, according to those surveyed. And for 44% of respondents, the pressure to do so is increasing. The good news, however, is that while company managements may be demanding, they also seem to be supportive: 90% of respondents either strongly agree or agree with the assertion that corporate leadership appreciates the value and importance of intellectual property. Demonstrating this value is crucial, according to the 50% of respondents who state that IP portfolio valuation is an essential part of any IP strategy. But although doing so can bring benefits in all kinds of ways, getting a valuation right is difficult, say respondents. This may be why nearly half of them believe that an industry standard would be beneficial.

A sizeable majority (68%) of respondents strongly agree or agree that company leadership is actively involved in strategic planning related to intellectual property. But despite this involvement, it seems that there is still some work to be done: only 13% of those surveyed believe that IP strategy is perfectly aligned with their company’s business strategy. That said, far fewer (4%) claim that the two strategies are not at all well aligned – a sign, surely, that steps are continuing to be made in the right direction.

Figure 8. What is your opinion on IP portfolio valuation? (Select a maximum of three options) (operating company)

Figure 9. My company’s leadership appreciates the value and importance of intellectual property (operating company)

Figure 10. My company’s leadership is actively involved in strategic planning related to intellectual property (operating company)

Figure 11. The IP function is coming under increasing pressure from senior management to monetise the company’s IP portfolios (operating company)

Figure 12. How aligned is IP strategy with business strategy in your organisation? (operating company)

The market

Figure 13. Has your company sold patents? (operating company)

Figure 14. Have you sold patents to an NPE? (operating company)

Figure 15. We are working with more corporates to enforce their patent rights than in the past (NPE)

The IP market is here to stay, it seems. Although 56% of corporate respondents revealed that their companies have not yet sold patents, only 5% state that they cannot envisage this ever happening. And many of those doing the selling are happy to sell to NPEs: over 50% of NPE respondents report that the number of operating companies doing deals with them is on the rise; while 44% either strongly agree or agree that “we are working with more corporates to enforce their patent rights then in the past”. That said, only 18% of operating company respondents are working with NPEs on monetisation programmes, albeit that just 7% have ruled this out altogether.

A big majority of NPE and a large number of operating company respondents agree that patent prices have fallen over the last 12 months. They also agree on why: decisions handed down by the US courts. This looks like the Alice effect coming into play (even if, anecdotally, it seems as though prices also fell in 2013). For operating companies, the most important reason by far to buy patents is to secure freedom to operate, although 17% do have an eye on money-making opportunities. And as for the most important jurisdiction in which to secure coverage, the United States is out in front, followed by Germany.

Figure 16. The number of corporate IP owners selling patents to NPEs is increasing (NPE)

Figure 17. Has your organisation bought patents? (operating company)

Figure 18. If you have bought patents, has it been primarily to: (operating company)

Figure 19. In terms of pricing, do you believe that: (operating company)

Figure 20. In terms of pricing, do you believe that: (NPE)

Table 2. If you believe that patents are now cheaper, what do you think has driven this fall in value? (Select up to three and list in order, with one being the most important) (operating company)

 Weighted average
Decisions handed down by US courts1.58
Greater availability of patents in the marketplace1.91
Implementation of the America Invents Act1.92
The winding down of the smartphone wars2.25

Table 3. If you believe that patents are now cheaper, what do you think has driven this fall in value? (Select up to three and list in order, with one being the most important) (NPE)

 Weighted average
Decisions handed down by US courts1.52
Implementation of the America Invents Act1.76
Greater availability of patents in the marketplace2.13
The winding down of the smartphone wars2.17

Figure 21. When purchasing a patent, do you use a broker? (operating company)

Figure 22. When purchasing a patent, do you use a broker? (NPE)

Figure 23. When divesting a patent do you use a broker? (NPE)

Table 4. When purchasing patents, which jurisdictions are your priority? (Select up to three and list in order, with one being the most important) (operating company)

 Weighted average
United States1.23
Germany2.03
Japan2.17
China2.35
United Kingdom2.41
Korea2.55
France2.75

Table 5. When purchasing patents, which jurisdictions are your priority? (Select up to three and list in order, with one being the most important) (NPE)

 Weighted average
United States1.18
Germany1.95
United Kingdom2.11
China2.43
Japan2.64
France2.67
Korea2.71

Figure 21. When purchasing a patent, do you use a broker? (operating company)

Figure 22. When purchasing a patent, do you use a broker? (NPE)

Figure 23. When divesting a patent do you use a broker? (NPE)

Table 6. Rate the quality of the patents issued by the following agencies (operating company)

 ExcellentVery goodGoodAdequatePoorN/A
European Patent Office19%41%21%7%3%8%
Japan Patent Office10%25%26%13%1%27%
Korean Intellectual Property Office5%11%25%15%4%40%
State Intellectual Property Office (China)2%10%23%21%16%29%
US Patent and Trademark Office9%23%35%19%9%5%

Table 7. Rate the quality of the patents issued by the following agencies (NPE)

 ExcellentVery goodGoodAdequatePoorN/A
European Patent Office19%37%18%10%1%15%
Japan Patent Office13%22%27%9%5%25%
Korean Intellectual Property Office3%6%31%16%5%39%
State Intellectual Property Office (China)2%3%19%24%11%40%
US Patent and Trademark Office15%10%30%25%10%11%

Table 8. Rate the quality of the patents issued by the following agencies (private practice)

 ExcellentVery goodGoodAdequatePoorN/A
European Patent Office15%47%25%3%0%10%
Japan Patent Office8%25%37%8%2%21%
Korean Intellectual Property Office2%18%29%18%3%31%
State Intellectual Property Office (China)2%12%26%25%6%30%
US Patent and Trademark Office7%23%39%18%6%8%

Table 9. How do you perceive that the quality of the patents issued by the following agencies has changed in the past year? (operating company)

 ImprovedStayed the sameWorsenedN/A
European Patent Office14%69%4%14%
Japan Patent Office6%61%2%31%
Korean Intellectual Property Office11%46%2%42%
State Intellectual Property Office (China)25%41%3%31%
US Patent and Trademark Office25%53%12%10%

Table 10. How do you perceive that the quality of the patents issued by the following agencies has changed in the past year? (NPE)

 ImprovedStayed the sameWorsenedN/A
European Patent Office19%60%1%19%
Japan Patent Office10%61%2%27%
Korean Intellectual Property Office15%47%0%38%
State Intellectual Property Office (China)23%36%2%39%
US Patent and Trademark Office27%53%5%14%

Table 11. How do you perceive that the quality of the patents issued by the following agencies has changed in the past year? (private practice)

 ImprovedStayed the sameWorsenedN/A
European Patent Office14%66%6%14%
Japan Patent Office9%65%1%25%
Korean Intellectual Property Office9%58%1%32%
State Intellectual Property Office (China)22%45%3%30%
US Patent and Trademark Office21%53%14%11%

Table 12. Rate the service that you receive from the following agencies (operating company)

 ExcellentVery goodGoodAdequatePoorN/A
European Patent Office17%28%25%11%6%14%
Japan Patent Office4%19%25%11%4%36%
Korean Intellectual Property Office4%14%20%13%4%45%
State Intellectual Property Office (China)3%11%25%17%7%37%
US Patent and Trademark Office11%20%35%19%7%8%

Table 13. Rate the service that you receive from the following agencies (NPE)

 ExcellentVery goodGoodAdequatePoorN/A
European Patent Office11%17%31%6%3%31%
Japan Patent Office0%10%28%8%7%47%
Korean Intellectual Property Office2%7%21%14%3%53%
State Intellectual Property Office (China)0%5%22%9%7%57%
US Patent and Trademark Office7%11%25%21%10%26%

Table 14. Rate the service that you receive from the following agencies (private practice)

 ExcellentVery goodGoodAdequatePoorN/A
European Patent Office10%36%23%11%1%19%
Japan Patent Office5%21%27%14%3%31%
Korean Intellectual Property Office3%15%27%14%2%39%
State Intellectual Property Office (China)2%12%31%16%3%36%
US Patent and Trademark Office8%26%30%14%6%16%

Litigation

The perceived wisdom has always been that big global patent suits are best resolved in the US courts. But the responses to this year’s survey indicate that this outlook may be changing. For so long the litigation venue of choice, the United States is now being challenged by Germany. Only a narrow majority of operating company respondents (37% to 35%) have more faith in the US litigation system; while NPE respondents prefer the German system by 41% to 38%. The 35% to 26% margin in favour of the United States from private practice lawyers may reflect the fact that so many of those responding were US based.

When it comes to thoroughness, all three groups of respondents put the United States way out in front; but although private practitioners may have most confidence in the US system, that does not stop them – by a very narrow margin – believing that Germany offers the best value for money. However, presumably with the potential for higher damages awards in mind, NPE executives give their vote to the United States in this regard, while those working in corporate positions also put the United States on top – perhaps because they can be defendants, as well as plaintiffs, and feel that they have a better chance of beating back accusations of infringement Stateside.

One other nugget to dwell upon: 69% of NPE respondents either strongly agree or agree that accused infringers are less likely to settle suits than they have been in the past. This is perhaps an indication that the courts are likely to be hearing even more cases than they have up to now.

Figure 30. Which of the following countries offers the best value for money for IP litigation? (operating company)

Figure 31. Which of the following countries offers the best value for money for IP litigation? (NPE)

Figure 32. Which of the following countries o ffe rs the best value for money for IP litigation? (private practice)

Figure 33. Which of the following countries has th e most thorough litigation system? (operating company)

Figure 34. Which of the following countries has th e mo st thorough litigation system? (NPE)

Figure 35. Which of the following countries has the most thorough litigation system? (private practice)

Figure 36. In which of the following litigation systems do you have the most confidence? (operating company)

Figure 37. In which of the following litigation systems do you have the most confidence? (NPE)

Figure 38. In which of the following litigation systems do you h ave the most confidence? (private practice)

Figure 39. Have you see n a decline in the number of NPE ass ertions that you are experiencing? (operating company)

Figure 40. Accused infringers are less willing to settle cases than they have been (NPE)

Figure 41. Which country is the most we lco ming to litigation from an NPE? (NPE)

EU patent and Unified Patent Court

The Unified Patent Court (UPC) could be up and running some time within the next two years, but its arrival does not appear to be eagerly anticipated. Just 12% of operating company respondents and 11% of those from private practice report that they are preparing enthusiastically for the new regime, while a further 29% and 35% respectively are getting ready, but cautiously. Worryingly – not least for investors and company managements – 23% of operating company respondents stated either that they have not yet begun thinking about a court system that could have jurisdiction over 25 countries with a combined population well in excess of 500 million, or that they have not even heard of it. This is especially concerning when just 4% of respondents state that Europe is not important to them.

In terms of the court’s potential impact, operating company, private practice and NPE respondents all agree that it is too early to tell. Notably, however, the second most popular answer from all three (tied in the case of NPEs) is that it will make Europe a much more important litigation venue. Also noteworthy is that while 15% of operating company respondents believe that the UPC will be particularly attractive to NPEs, just 10% of NPE respondents feel the same way. It will be interesting to see how those figures develop once the court starts issuing decisions.

Figure 42. Are you actively planning for the new EU unitary patent? (operating company)

Figure 43. Are you actively planning for the new EU unitary p at ent? (private practice)

Figure 44. What are your views on the Unified Patent Court regime? (Select up to three options) (operating company)

Figure 45. What are your views on the Unified Patent Court regime? (Select up to three options) (NPE)

Figure 46. What are your views on the U nified Patent Court regime? (Select up to three options) (private practice)

US patent reform

Figure 47. Has the America Invents Act had a significant impact on your company’s IP strategy? (operating company)

Figure 48. Has the America Invents Act had a significant impact on your company? (NPE)

Figure 49. Has the America Invents Act had a significant impact on your IP practice? (private practice)

The America Invents Act was signed into law by President Obama in 2011. It is now making its mark across the spectrum, with 40% of operating companies and 62% of NPEs stating that it has had a significant impact on their IP strategies. Operating company respondents report that the America Invents Act has caused them to rethink their approaches to patent filing. The top response was that, as a result of the act, companies are now submitting fewer applications, while the third most chosen option was that companies are filing more. Sandwiched in between was the statement that “We have been adversely affected by the new inter partes review regime”. For NPE respondents, the biggest issue is how much harder it has become to successfully assert patents; the negative reach of inter partes reviews was placed third. Law firm respondents, on the other hand, state that the most noticeable effect of the America Invents Act is the successes their clients are now enjoying in inter partes reviews.

Perhaps surprisingly, when commenting on the post-America Invents Act environment, the number one response from NPEs was that things are pretty much the same as they were; however, the statement that “It has never been harder to be an NPE” came in second. More optimistically from the NPE perspective, there is also a general consensus that new opportunities are now beginning to appear. With regard to the need for further reform, operating company respondents are far more positive than those from private practice and NPEs; but in all categories, the majority state that they do not favour more change at this time.

Table 15. If yes, in what areas? (Select your top three in order) (operating company)

 Weighted average
We now file fewer patent applications1.47
We have been adversely affected by the new inter partes proceedings1.53
We now file more patent applications1.63
We have benefited from using the new inter partes proceedings1.75
Our proportion of grants to applications has fallen1.77
First to file has made it easier to coordinate our international patenting strategies1.79
First to file has made it harder to manage our patent strategy1.85
We have been adversely affected by the covered business method review proceeding2
We have benefited from using the covered business method review proceeding2.17
We have benefited from using the post-grant opposition system2.42
We have been adversely affected by the post-grant opposition system2.67

Table 16. If yes, in what areas? (Select your top three in order) (NPE)

 Weighted average
It has made successfully asserting patents more difficult1.48
First to file has made it easier to coordinate our international patenting strategies1.57
We have been adversely affected by the new inter partes proceedings1.66
We have benefited from using the new inter partes proceedings1.67
We now file more patent suits1.88
We have benefited from using the covered business method review proceeding2
We now file fewer patent suits2.08
We have been adversely affected by the post-grant opposition system2.2
First to file has made it harder to manage our patent strategy2.25
We have been adversely affected by the covered business method review proceeding2.33
Our proportion of grants to applications has fallen3
We have benefited from using the post-grant opposition system3

Table 17. If yes, in what areas? (Select your top three in order) (private practice)

 Weighted average
Our clients have benefited from using the new inter partes proceedings1.5
Our proportion of grants to applications has fallen1.73
First to file has made it easier for our clients to coordinate their international patenting strategies1.85
Our clients have been adversely affected by the new inter partes proceedings1.88
Our clients have been adversely affected by the covered business method review proceeding1.88
Our clients now file fewer patent applications1.93
Our clients have benefited from using the covered business method review proceeding2.06
Our clients now file more patent applications2.08
First to file has made it harder for our clients to manage their patent strategies2.18
Our clients have been adversely affected by the post-grant opposition system2.25
Our clients have benefited from the post-grant opposition system2.29

Figure 50. What are your views on calls for further legislative reform in the United States? (operating company)

Figure 51. What are your views on calls for further legislative reform in the United States? (NPE)

Figure 52. What are your views on calls for further legislative reform in the United States? (private practice)

Table 18. How would you categorise the operating environment for NPEs in the United States currently? (Select your top three in order) (NPE)

 Weighted average
It is pretty much the same1
It has never been harder to be an NPE1.28
Opportunities in new sectors are appearing1.6
Recent court decisions and legislation have provided new opportunities for NPEs2
We expect to see fewer NPEs operating in the future2.02
We expect things to get a lot harder2.05
It makes a diversified portfolio much more important2.36
More operating companies are looking to work with NPEs2.38
We believe that the pendulum will swing back in favour of patent owners2.56

Threats

Table 19. Rank the top three biggest threats to your company's IP portfolio today (with one being the biggest threat)(operating company)

 Weighted average
Cost of litigation1.71
Lack of resources1.92
The quality of patents being granted1.99
Lack of interest from the boardroom2
Growing restrictions on patentability2.02
Anti-patent sentiment in parts of the world2.07
Backlog at major patent offices2.09
NPEs2.1
Decrease in patent values2.14

Table 20. Rank the top three biggest threats to your company’s IP activities today (with one being the biggest threat) (NPE)

 Weighted average
The quality of patents being granted1.4
Anti-patent sentiment in parts of the world1.72
Cost of litigation1.88
Growing restrictions on patentability1.93
Anti-NPE sentiment1.95
Decrease in patent values2.25
Lack of resources2.35

Table 21. Rank the top three biggest threats to your clients’ IP portfolios today (with one being the biggest threat) (private practice)

 Weighted average
Cost of litigation1.76
Lack of resources1.77
Anti-patent sentiment in parts of the world1.95
Growing restrictions on patentability1.97
Lack of interest from the boardroom2.04
NPEs2.24
Backlog at major patent offices2.27
Decrease in patent values2.34

The cost of litigation is the primary threat to IP portfolios today, according to operating company respondents. This is closely followed – and doubtlessly brought into sharper focus – by a lack of resources. Costly litigation is presumably counterbalanced by the promise of reward for NPEs and so finds itself further down the list of threats. Instead, they put the quality of patents being granted at the top – understandable for entities focused on monetisation and aware that licensing deals and successful assertions will not happen with inferior assets.

Somewhat surprisingly, the threat that NPEs pose to operating companies – and that same threat as perceived by private practitioners – comes close to the bottom of the list for our respondents, though this may reflect the fact that respondents in both categories largely operate in sectors that are unaffected by NPE activity. And for NPEs themselves, perceived anti-NPE sentiment is far from the most pressing threat that they face. This could be because NPE respondents have learned to live with the fact that they are not exactly popular, or could alternatively be attributed to a greater acceptance of NPE business models by the wider IP community.

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