Portfolio Mining and Analysis

Portfolio Mining and Analysis

Frank S. FarrellF.S. Farrell, LLC7101 York Avenue SouthSuite 305Edina, MN 55435 Phone: 952-921-3260Fax: 952-216-0106Email: [email protected]

MIPLA Corporate Practice CLEMarch 26, 2004 – Minneapolis, MN

Presented by Frank S. Farrell

Portfolio Mining

• A systematic process of organizing and classifying an intellectual property portfolio with an eye to extracting value



Today’s Situation

• Disconnect between technology roadmap and patenting– Patents become way to document

product development, not innovation

• Disconnect between IP development and revenue generation– Patents obtained but sit unused



• Patents are a defensive tool• Licensing your patents to others is

expensive• Licensing will make your competitors mad• The returns aren’t worth the risk• We’ll look greedy or opportunistic

Original Assumptions - No Longer Valid



How Did We Get Here?

• U.S. R&D spending continues to rise (R&D spending in 1999 was $244B, 44% of total worldwide R&D)

• Non-governmental (NG) R&D is 75% of total R&D• License fee revenue is 10-15% of NG R&D dollars

(Arora et al., Markets for Technology (2002))• R&D expenditures have fueled explosive IP growth

– 103,703 patents were applied for in 1983, with 59,400 filed by U.S. Applicants – 57,000 were granted

– 326,000 patents were applied for in 2001, with 173,000 filed by U.S. Applicants – 166,039 were granted



U.S. Patent Applications

0

50000

100000

150000

200000

250000

300000

350000

400000

1963

1965

1967

1969

1971

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1975

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1979

1981

1983

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1987

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1995

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1999

2001

2003

Year

No.

of A

pps U.S. Filings

Foreign Filings

Total Filings



U.S. Patent Grants

0

20000

40000

60000

80000

100000

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140000

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180000

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1965

1967

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1991

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1997

1999

2001

2003

Year

No.

of P

aten

ts U.S. Patents

Foreign Patents

All Patents



Extracting Value From Existing IP Portfolios

• How to recognize value in your Portfolio

• How to capitalize on that value

• How to use that knowledge to craft your IP strategy



How to Recognize Value in Your IP Portfolio

• Organizing your Portfolio

• Classifying the IP

• Identifying revenue producing opportunities



Organizing Your Portfolio

• Organize by Technology Area– Easy, often can do automatically based on

patent class

• Map Patents on Products– More difficult, requiring participation by

product designers, but also more revealing



Classifying Your IP –Core or Non-Core?

Non-Core Core

US 4444444

EP xx/xxxxx

TM xyz

US 5555555

WO xx/xxxxx

US 4444455

JP xx/xxxxx

US 6666666

DE xxxxxxxx

FR yyyyyyyy



Classifying Your IP -Product or Potential Product?

Never Product Possible Product

Product

US 4444444

EP xx/xxxxx

TM xyz

US 4444455

JP xx/xxxxx

US 5555555

WO xx/xxxxx

US 6666666

DE xxxxxxxx

FR yyyyyyyy



Identifying Revenue Producing Opportunities

• Are there infringers?

• Are there any new business opportunities?



Identifying Revenue Producing Opportunities

• How:– Competitive Technology Intelligence– Patent Mining of Competitors– Technology Forecasting– Engineers and Marketing

• Assessment of Competitors

• Brainstorming on alternative uses of patented technology



Capitalizing on the Value In Your IP Portfolio

• Transfer the IP by Sale or Donation– Low risk, guaranteed reward

• Borrow against your IP Portfolio– Pro: Make use of an otherwise

nonperforming asset (esp. M&A)– Con: Maintenance fees/annuities, interest




• License your IP– Pro: Potential for greater returns– Con: Maintenance fees/annuities, retain

risks of invalidity and unenforceability

• Transfer IP to a Joint Venture– Pro: Potential for greater returns than above– Con: Risks of failure of any new business




• Enforce your IP– Pro: Potential for greatest returns– Con: Maintenance fees/annuities, retain

risks of invalidity and unenforceability, high costs of litigation (if necessary)



Adopt a Portfolio Management Strategy

• Decide whether you will license core technologies to competitors

• Decide whether you are going to pursue infringers to generate revenue or to keep them out of particular product areas

• Develop strategy for aligning patent acquisition with existing and planned products and services



IP Revenue Methodologies –Core or Non-Core?

Non-Core Core

License or sell License Non-Competitor

License or sell Enforce or Do Nothing

Competitor



IP Revenue Methodologies –Product or Potential Product?

Never Product

Possible Product

Product

License or Sell

License, Sell or Joint

Venture

License Non-Competitor

License, Sell or Joint

Venture

Joint Venture or Do Nothing

Enforce or Do

Nothing

Competitor



IP Revenue Methodologies –Comp. vs. Noncomp. Value?

Low Competitive

Value

High Competitive

Value

Sell or Donate Enforce or License(?)

Low Non-Competitive

Value

License, Sell or Joint Venture

Enforce, License for

noncompetitive uses

High Non-Competitive

Value



Crafting Your IP Strategy to Enhance Value

• Patenting to enhance revenue producing opportunities

• Pruning your portfolio

• Charting future development and patent strategies



Patenting to Enhance Revenue-Producing Opportunities

• Patent to instantiate R&D dollars – Track patents to research and development

goals

• Identify areas of patent weakness– Spend R&D $$ in core areas of technology

where patent protection weak

• Identify areas where technology is moving

• Catch ideas outside of product lines



Pruning Your Portfolio

• The cost of maintaining a patent increases nonlinearly as the patent ages– Review patent portfolio annually to

determine if patents should be allowed to lapse, or should be sold or donated

– Decision based on licensing potential/ revenue vs cost of maintaining



Charting Future Development and Patent Strategies

• Patent to complement your biz strategy– Track patents to research and development goals

– Patent in areas where competitors have to move

• Emphasize and invest in core areas of technology where patent protection weak

• Identify and exploit patent weakness on the part of competitors

• License or purchase patents that do above



Conclusion

• Recognizing Value in Your IP

• Capitalizing on that value

• Using that knowledge to craft your IP strategy both in reducing expense and increasing value



Recommendations

• Organize your IP portfolio to identify revenue opportunities

• Pursue the revenue opportunities• Prune your portfolio• Patent to complement your biz strategy

– Track patents to research and development goals

– Patent in areas where competitors have to move

• Emphasize and invest in core areas of technology where patent protection weak

Portfolio Mining and Analysis

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