More patents than the space shuttle

A German luxury vehicle manufacturer attracted a lot of attention in 2006, when it advertised that it had “filed 9,621 patents during the development of its new model A6 sedan compared with NASA 6,509 for the space shuttle. The hope, of course, is that the public will arrive at the conclusion that the A6 is more technologically advanced than a vehicle that is launched into space by 34,677 kN of thrust

Patenting statistics are often used as a measure of innovation. A company may use its patent portfolio to create or enhance the perception that it is a technology pioneer, a visionary or a forerunner. With such emphasis on the size of a patent portfolio, no wonder that patentees are reluctant to objectively assess the value of each of item in a patent portfolio or to lapse or withdraw patents/applications that are not, or will not, pull their weight.

There are a few things that are worth bearing in mind when assessing a patent portfolio, either as a potential investor in a patentee or as the custodian of your own patent portfolio.  

1.Territoriality

Rights conferred by registered intellectual property, such as patents, are territorial in nature. They exist only as a result of, and are enforceable under, the laws applicable in that territory. So a portfolio comprising numerous patents could mean that a single invention has been protected in a number of different countries and not that the patentee is a prolific innovator. A patent registered in a country in which there is no market for the patented article (nor any potential for a market in future) will be of limited value, if any at all. But note that a patentee can prevent the manufacture of a patented article in that territory so a patent in China or another manufacturing metropolis may be useful.

2.Non-examination

It is possible in some countries, to have a patent granted for an article or process that is neither novel nor inventive. In these countries there is no substantive examination of the patent application. In other words, a search is not conducted to identify prior art that would anticipate the claimed. South Africa has a non-examining patent system, which means that a patent could well be granted for an article or process that is not novel or inventive and this patent is valid until proven otherwise. Of course, in practice when a patentee institutes proceedings for patent infringement the defendant will likely counterclaim for revocation of the patent on the grounds that, at the time that the application for the patent was lodged, the invention lacked novelty and/or inventiveness. Beware of assuming that a patent is useful only to realise in the course of infringement proceedings that the patent would be invalid if challenged and therefore that it would be ineffective in preserving a monopoly in the field of the invention.

3.Scope of Protection
The scope of protection afforded by a patent is defined by a set of claims. The claims are carefully crafted by a patent attorney to ensure that the patentee obtains the broadest possible protection for the invention. Of course, if the claims are too broad, the claimed invention will not be novel and inventive over prior art. Generally speaking, the narrower the scope of protection afforded by the claims, the more likely it is that the claimed invention meets the requirements for patentability. An applicant for a patent may elect to proceed with the prosecution of an application in the face of prior art revealed during examination and despite the narrow scope of protection, in light of prosecution costs already incurred (a narrow scope of protection may be better than no protection at all) and the deterrent value that is associated with a patent. But in assessing an existing patent portfolio as an investor, for example, one should be aware that the scope of a valid patent issued by an examining authority, may be so narrow that it is easily designed around.

4.Enforceability
A patent may be granted for an inventive process. This process may be useful in producing a commodity item more efficiently or less expensively, for example. However, in this case, the fact that the item was made using the patented process is not immediately apparent from the outward appearance of the item itself so policing for infringement of the patent and obtaining proof of infringement is no simple matter. Again, the patentee may find that, in practice, the patent is of limited value in securing a monopoly for the patentee in the field of the invention.

5.Competitive Landscape
A patent gives the patentee the right to prevent others from making, using, exercising, selling or importing the invention in the country in which the patent is registered. It is a tool for preserving competitive edge and lessening competition. There may be factors which render a patent redundant in a particular market. For example, where there are already are high barriers to entry or little competition for other reasons.

6.Prosecution and Renewal Fees
The costs associated with prosecuting a patent application and maintaining a patent portfolio in force, are not for the feint-hearted.

There are at least two very good reasons why the prosecuting costs of a patent application must be carefully budgeted for:

If the application is abandoned at any time before the application proceeds to grant, all the money spent on prosecution up until that time is non-refundable and the applicant will be left with nothing to show for it.

The prosecution process often involves publication of the patent specification, so if the application is abandoned at any time before grant, the applicant will not only have no means of preventing others from making, using or selling the invention but will also have told the world how to do it.

In addition to prosecution costs, the proprietor of a patent (and in some cases, of an application as well) must pay renewal/maintenance fees to preserve its status. By way of example, the official fees alone for the annual final-year renewal of a patent family protecting a single invention in 17 African countries through the African Regional Intellectual Property Organisation will be around US$8,840. Ultimately, the value of each patent in a portfolio must weighed against its prosecution, renewal and enforcement costs.

If used and managed properly, a patent portfolio can be instrumental in creating or boosting a competitive advantage. But don't be fooled by the size of a patent portfolio there is more to a patent than the mere fact of its existence and as with most things: quality is more important than quantity.

This article was first published in the EngineerIT August 2013 issue.

Date published: 2013/08/28
Author: Dina Biagio

Tags: patent news patent portfolio engineering