Quality over quantity: strategies for improving the return on your patents.

When executives, engineers, and scientists look proudly at their patent display walls, they see achievement, but they also could be looking at gold. For many companies, their patents are a potential source of significant revenues that has remained untapped simply because the patents have not been evaluated, tested, or revised before being issued by the patent office.

According to Dr. Bernie Meyerson, an IBM Fellow, "In the 1960s, a dollar of semiconductor R&D spending would generate $40 in revenue. Now it returns just $6." (1) This fact is leading many companies to look for alternatives, namely their patent portfolios, to generate more revenue from their inventions. The transformation of a patent portfolio into revenue requires the following:

* A strategic patent revenue plan;

* A precise definition of patent quality;

* Expert technical and legal examination of a company's patent applications;

* Selection of the patent applications most likely to succeed (as infringed patents);

* Revisions to ensure patent quality; and

* Enforcement to generate licensing and other revenues.

From Quantity to Quality

"So, what's the return on these patents?" The annual board meeting had been going well, exceptionally well, in fact, until a new board member, the IP specialist brought in by a senior investor, turned to the Chair and, waving to the company's patent display board, said those very words, "What's the return?" No one had an answer.

Patents are testimonials of real achievement. They are tangible proof of innovation, intelligence, foresight, and sometimes just plain hard work. Individuals, organizations, and companies are justifiably proud of their patent display walls, for each plaque on the wall represents a new patent and, with that patent, new opportunities.

The new board member's question in the scenario above is not gratuitous criticism, however. It is entirely reasonable, and in today's business environment, it is essential. For the past few years, a seismic shift has occurred in the way that companies view their patents.

In 2004, 376,810 patents were filed with the US Patent and Trademark Office (USPTO), a threefold increase from the 117,985 patents filed in 1984. In 2005, a record 409,532 patent applications were filed, representing an 8.1 percent increase over 2004. (2)

Only a decade ago, the tactic used by most companies was simply quantity: Hold as many patents as possible and some will bear fruit. Companies today, however, are realizing that quantity of patents does not necessarily mean profitability. Increasingly, they are realizing that value depends not so much on …