As founder and CEO of Patent Contacts, are there particular aspects of your patent transaction services that your clients did not expect, but found valuable?
As a dedicated brokerage platform, we assist clients in their efforts to divest and/or acquire patents, but we do not involve ourselves in licensing. We do not wish prospective buyers to have second thoughts about why we may be calling them when we have patent assets that may be great for them to acquire. Accordingly, we are not ‘conflicted out’ from any entity that should really see what we have to offer.
Part of our pedigree as a transaction facilitator is our deep involvement in patent analytics. For sellers, this helps us to isolate candidate patents to bring forward in a market offering. For buyers, this streamlines their portfolio acquisition analysis. All of the analytics are done in a format of automated controlled descent into the most rational selection of divestment candidates and the top acquisition subsets based on target technologies that clients are seeking.
As the name implies, we have numerous patent contacts within the top 30 international patent holders, based on facilitating patent transactions for more than two decades.
Is it ever a good idea to acquire or divest a partial patent family?
No. Buyers should acquire control of complete patent families in all jurisdictions where counterparts exist. If this is not done, a remote partial owner could assert the counterpart patents they own and end up with a negative court judgment, or worse – an invalidation that would cast a shadow across the entire patent family, including those counterparts that the buyer acquired. For a seller, offering a partial patent family is not advised since buyers will be aware of the prior remark and lack interest.
What happens in a transaction if a patent family is found to be incomplete?
Before closing a transaction, the buyer will likely note that the patent family is incomplete and demand that the missing patents be included or insist upon the removal of the partial patent family from the portfolio. They might also claim that, in their estimation, this patent family was a significant contributor to the value of the entire portfolio and thus, if it is removed, press for a significant discount.
This is why we always do a ‘family integrity’ check of every portfolio we receive before carrying out any further work on it, to avoid last-minute missing counterpart discoveries down the line. Even some of the largest patent holders have sent in portfolios that they were sure were fully complete and we have had to go and have them find and make available the additional missing counterpart patents – or drop the families that were discovered to be incomplete, since buyers will reject them.
What about expired or lapsed patent family members?
We include them all in patent lists and recommend to buyers that they be acquired along with the live patent family members. This ensures that a party cannot acquire them and get the USPTO to reinstate them, which would split the ownership of the patent family and cause difficulties.
Are forward citations an indicator of patent value and where does one look to find ?
Yes, forward citations are one of the markers of patent value that can be used in combination with other patent attributes, such as evidence of use. Under Section 1.56(a), Chapter 37 of the Code of Federal Regulations, an inventor has the “duty of candor and good faith in dealing with the [USPTO], which includes a duty to disclose to the Office all information known to that individual to be material to patentability” at the time of filing a patent application.
Accordingly, inventors must at least identify the patents known to them that may be relevant to the examination of their own patent applications. Thus, if a patent owner tracks the forward citations to their own patents, they can see other entities’ more recent filings, where inventors felt that the patent owner’s patents were of relevance to the newer filings’ patentability. This can be useful information, as it may reveal the names of entities that are making filings in the same technology classification codes as one’s own patents. They may later have some interest in acquiring them if only to either obtain an earlier priority date or to prevent licensing firms from acquiring them.
Forward citations are sometimes hidden in plain sight. Often such citations are registered by filing entities against your published applications prior to the issuance of your granted patents. Thus, if you go looking for forward citations by analysing only your granted patents, you may find very few. This tends to keep such citations somewhat hidden and masks the actual patenting direction and strategy that the forward citing entities may be executing. Accordingly, we treat forward citations as a family matter and aggregate them across all patent family members and all stages of prosecution, including both published applications and granted patents.
There are novel ways to leverage forward citation data. One way is to find second-order citations (citations to the forward-citing patents). If this number ramps up dramatically, then the patent may well be foundational in its technology classification. We perform such analyses on occasion, just to get a sense of which patents are core to a patented area that the industry knows well.
Is evidence of use critical to the sale of a patent family?
Yes, but there is one exception to this rule. Evidence of use is documentation that shows an entity is using your patents’ teachings in products that they have developed and are shipping to the market. At a more detailed level, it is typically documented in claim charts, which map each claim element of a specific patent claim to product features and documentation. This is usually done in a tabular form with each claim element listed in a left-hand column and supporting evidence from the product in question in a right-hand column with, possibly, a centre explanatory column.
This is how infringement is accurately documented and it serves to establish the deployment of patent claims within products and thus infringement of the claims and what activity may – or may not – be licensed. This methodology also vectors directly into patent value since one can assess the value of the unlicensed infringed market by the estimated royalties that one could derive by demanding licences with the infringing manufacturers.
The correlation in broad terms between evidence of use and patent value is also interesting. The following syllogism helps to illuminate how evidence of use works, since patents are an exclusionary right that allows patentees to demand royalties (and possibly past damages) from infringers that are not duly licensed. If one asks the question “is anyone shipping product for which there is evidence that our claims are being practised?” If the answer is “no”:
- there will be no one wanting to acquire the patents to protect one of their products, since no one practises the claims;
- there will be no one wanting to acquire the patents to use them for counter assertion against adverse parties, since such parties do not practise the claims;
- there will be no one wanting to acquire the patents to gain an investment return through licensing, since there are no entities to license as no one practises the claims; and
- none of the defence funds will have an interest in the patents since licensing firms have no one to licence and thus the patents do not threaten their members.
After reading the above list, one might surmise that without evidence of use, patent value in all cases diminishes to zero. Not always!
There are situations where inventors are acutely aware of the direction that technology is likely to take because of their deep knowledge of related science and discoveries associated with their area of expertise. So, some patents (eg, semiconductor patents) have claims that are forward looking – infringement of those claims is likely to occur in the future but their patented teachings have not yet evolved into industry practice. Transactions can occur in such cases if prospective buyers have sufficiently deep technical knowledge to recognise that industry, in order to advance along a well-understood road map, will have to cross over the technical territory covered by the patents. Thus, such patents are valuable without current evidence of use because of the territory they traverse now and that being the same territory the industry will have to cross over in the future.
What are the key attributes that one looks for when trying to identify patents for divestment from a large portfolio?
The following list characterises the ideal patent family for divestment if all attributes were present for the selected patent family:
- it is easy to detect infringement;
- it is easy to explain the patented invention to a jury;
- no prior art issues;
- past, present and future use in industry;
- method claims leading to six years of past damages being available;
- no ‘means plus function’ claims;
- it is hard to design around the invention to reach the same result;
- families have multiple granted patents and pending applications;
- an annual value of unlicensed and infringed market greater than $1 billion;
- if the invention is a standalone concept, not just an improvement;
- no lapse periods followed by reinstatement;
- no government interest due to economic development funding;
- all terminal disclaimer prior patents are included;
- a significant list of forward citations from major industry players;
- over five years of remaining life; and
- if you are the seller, multiple patents with the same classification codes retained in your portfolio for ongoing product line support.
While it is obviously difficult to find patents with all of these attributes, it is worth the effort to seek as many of these features as possible.
What questions do major patent holders ask when considering portfolio acquisition?
Questions such as whether all inventors transferred their interest to the company they worked for when the patents were issued, if the patents have been litigated before, if SEPs were involved, what licenses have been entered into by the patents’ prior owners and whether we can determine if prior art would invalidate such patents in the future if we do not buy them now are all examples of typical questions that patent portfolio evaluators want answers to when considering acquiring a patent portfolio.
Patent Contacts CEO Art Monk is a patent brokerage visionary, having facilitated transactions for tech firms worldwide for over 20 years. Clients seek his expertise for acquisitions and portfolio divestments. Mr Monk's career has included roles as vice president of patent transactions at TechInsights and co-founder of Inflexion Point Analytics. He is renowned for inventions in computational tools for patent discovery, using them to locate key patents in large portfolios.