When is it a better strategy to buy patent rights versus filing your own applications at the Patent Office? This is a question that most law firm patent attorneys can’t answer. The vast majority of patent attorneys are trained to prosecute new filings – they are typically not trained to deliver on a multi-pronged portfolio development strategy, meaning they don’t offer up patent trading as a standard service.
Conversely, in-house patent departments, especially for the top companies, do have full-time IP professionals dedicated to IP transactions. This creates a sophistication gap in the IP world that has many IP owners frustrated when they are left holding onto assets they can’t divest successfully, or can’t cost-effectively acquire patents to fill gaps in product coverage.
Finally, it is also important to understand that your chances of actually getting the claims you want are subject to a degree of randomness at the Patent Office. Fighting through patenting uncertainty can be extremely frustrating and costly.
At ClearAccessIP, we’ve worked with hundreds of companies who’ve been left stranded by the patent system and did not even know that buying or selling patents could be an option for them. Here are 5 signs that should have you thinking seriously about in-bound patent acquisitions:
1. You need patent coverage now and can’t wait 2+ years to get it.
According to US Patent Office statistics, a patent filer has less than a 50% chance of getting a patent application granted, and it will take on average 23.8 months per application.
There are currently 551,000 patents awaiting examination at the United States Patent and Trademark office. In 2018 around 308,000 patents issued. In that same year, 602,000 new applications were filed. According to the USPTO’s data, only about half of submitted applications become issued patents, and for those it takes 23.8 months from the time of filing to issuance, 19 months of which are spent in active prosecution (i.e. responding to the examiner’s rejection of the application.)
If your company has a product on the market, or is soon to put a product on the market then you should absolutely consider in-bound patent or license acquisitions. The speed to market should never be slowed due to patent coverage. If your patent attorney is telling you to wait on your go to market strategy, ask them about transactional opportunities.
There are lots of opportunities for licensing from friendly patent holders who wish to engage with you in good faith and with equitable dealing. Universities, for instance hold hundreds of thousands of assets covering the full spectrum of R&D and innovation. ClearAccessIP works with several of them. Below you can see an example of UC Regent’s Machine Vision portfolio which is searchable using Key Phrase labels:
Shopping for patents should be simple and easy, but until just recently it has been prohibitively expensive which is why many patent attorneys don’t coach their clients on it.
2. The PTO examiner doesn’t understand your technology.
A common complaint we hear from innovative companies is that they’ve been assigned a Patent Examiner who doesn’t understand their technology.
During substantive patent examination, a patent examiner is assigned to review your application. To begin examination, they will perform a basic boolean-based patent search based on your claims, and depending on the search report reject your application. One former examiner recently commented: “I almost always rejected claims the first time….We were almost never permitted to allow anything the first time around.”
One inventor whose patent on hurricane window protectors was rejected by the patent office summed up his experience:
While we agree that waiting to go to market is not the best option, we don’t suggest blindly going to market. Patent analytics and trading opportunities exist and are more readily productive than ever before. The best possible strategy is going to market with your product in parallel with active participation in secondary patent market opportunities.
3. Your engineers’ time is too valuable to spend dealing with patent attorneys.
The process of knowledge transfer from engineer to patent attorney can cost an organization valuable engineering time. Pulling engineers off of projects to educate patent attorneys can interfere with important deadlines, and can also send the wrong signal to the organization about how engineers should prioritize their time.
Below is the average amount of time spent in transferring knowledge at each phase of the patenting process:
- Written Invention Disclosure: 9 hours
- Initial disclosure conference: 4 hours
- Follow-up disclosure conferences: 10 hours
- Review application: 4 hours
- Submit edits: 6 hours
- Final application review: 3 hours
- Review Office Actions (average of 3 per application): 12 hours
- Attorney conference regarding Office Actions: 6 hours
- Review Attorney response to Office Actions: 9 hours
Total engineer time spent per application: 63 hours
Another thing to keep in mind is the opportunity cost of patenting. The 63 hours of engineering time is spread out over several years, and there can be large gaps between patent attorney engagement (for instance it takes 21 months from the time of filing until the first Office Action). This means the engineer has to go back to earlier notes, and check whether the technology has evolved since the initial filing. Oftentimes it has, and the claims as initially filed are no longer relevant, and a new filing needs to be submitted to correctly cover the evolved aspects of the product. This endless patenting loop has some engineers at companies spending an enormous amount of time working with patent attorneys, and less time contributing to engineering efforts.
4. You want a capitally efficient patent strategy.
The Patent Office divides examiners and patents by Art Unit Numbers, a measure that organizes examination based on a Patent Office assigned technology category to a new application. Some Art Unit numbers have grant rates that are dramatically lower than the average, such as Art Unit 3689 on Data Processing of Financial, Business Practice, Management, or Cost/Price Determination. If your application is assigned to this art unit number you have about a 6% chance of actually getting an issued patent.
Below is a pricing chart provided by Thervo on the national averages for legal and government patent filing fees (this doesn’t include the average $5,500 per Office Action Response or ~$14,500 Government Maintenance fees paid over the lifetime of the patent):
When you add in the legal cost of responding to three Office Actions per patent (Avg. $16,500), the overall capital at risk is about $27,000 per application plus dozens of hours of engineering time.
Conversely, you can spend your IP budget on claims that have already been granted. The benefit of shopping for patent rights is that you’re in the power seat. There are usually hundreds of granted patents within the technology definitions your product is operating in. Natural language AI can be leveraged to map your technology to existing granted claims at a very low cost. The cost of exploration can be as little as $2 per asset (ClearAccessIP’s largest volume discount), and the cost of the deal is only paid at the close of the deal (ClearAccessIP applies a 1.5% processing fee).
Capital efficiency gains include:
- Immediate access to patent rights.
- No need to pay government fees on licenses.
- Flexibility to negotiate pricing based on term (i.e. you can pay for 1-2 years of coverage versus paying for the lifetime remainder of the patent).
- Assurance as to the claims coverage.
- Reduced load on the engineering team.
5. You are looking for M&A and partnership opportunities.
Innovative companies operate in dynamic ecosystems. Self-driving cars is a great example of this: there are thousands of SMEs worldwide that are creating IP relevant to the next generation of automotive manufacturing.
Fleet Management Software for Autonomous Vehicles is one example where we expect M&A and partnerships to take off. Below is an AI-generated IPDealRoom exemplifying multiple partnership discussions Lyft (the patent owner) could be having with Cruise, BaiDu, StateFarm and Google on IP related to Fleet Management. We’ve designed ClearAccessIP so that companies like Lyft can hold multiple discussions side by side without having to engage with legal counsel each time one of these parties would like to advance a conversation. The benefit of aggregated discussions allows parties to truly shop for the best opportunity for their company.
Furthermore, many of the inefficiencies and costs associated with M&A and partnerships can be alleviated by integrating AI services that get to the root of IP-focused dealmaking. These include:
- Pricing discovery
- Legal due diligence
- Competitive analysis
- Terms negotiation
All of this historically has been led by legal counsel using complex processes and tools that rack up transaction costs and make multiple parallel conversations prohibitively expensive. ClearAccessIP is unbound by the legal billable hour, and we encourage users to treat IP transactions as a gateway to M&A and partnerships.
Patent stakeholders are increasingly looking for new methods to cut costs and get to market more efficiently. It is hard to believe that SMEs who are so focused on capital efficiency in all aspects of the business set these values aside and gamble on their IP to the tune of $27,000 on a single new application that has less than a 10% chance of converting into a patent. It is also mind blowing that most innovative companies do not have access to the high quality IP advice that the top .001% of companies access every day. This raises red flags about equity in innovation ownership.
ClearAccessIP is designed to support equitable access to IP trading at a cost any stakeholder can afford. Because participation in a free market of innovation is essential to the viability of the IP system as a whole, our focus will always be around your success. To read more about our commitment to supporting your experience in the patent marketplace, please read our IP Stakeholder Bill of Rights.