Indicating Value

Many people feel that estimating the value of a patent is like estimating the value a lottery ticket.  In essence you are trying to determine if the ticket is a winner.  These people make the point that, like lottery tickets, the statistical distribution of patent values is highly skewed.  And they are right.  Once you dig into the details of the PatVal-Eu survey you find that the top 1.5% of patents represented about half of all patent value. 

In the end though, I don’t buy the argument.  Techniques exist to value the cash flow, price premiums and cost savings that accrue from patents and patent owners would know the information required to use them.  And even if half the value is tied up in the top, the other half is still a lot of money. 

And the probability of winning the lottery is a whole lot less than 1.5%

But it would be nice to have some external indication of patent’s value.  This is the question addressed in Citations, Family Size, Opposition and the Value of Patents by Harhoff, Scherer and Vopel.   In a study of 11,471 German patents, the authors build a model of patent value using publicly available information about the patents.  The study concluded that the following factors could be used to predict patent value.

Forward and Backward Patent Citations:  The concept of forward and backward citation is a commonly used, deeply ingrained and spectacularly confusing way to refer to documents that cite other documents.  Forward simply means the patent (or document) was cited.  Backward means the patent made the citation.  What the Hardoff study found was that the number of forward and the number of backward patent citations both indicated higher probable patent values. 

Backward Non-Patent Literature Citations:  The more references a patent made to Non-Patent Literature (usually journal articles) the higher the probable patent value.

Number of Jurisdictions:  If the same invention is patented in multiple countries (jurisdictions) this is an indication of higher patent value.

Surviving the Opposition Procedure:  The German Patent Office provides for a process called opposition.  Under the opposition procedure, anybody can oppose the validity of the patent grant within three months of the date of the grant.  The Patent Office would then review the arguments for opposition and reestablish their grounds for issuing the patent grant.  In the survey, about 8% of patents faced opposition and about 14% of oppositions were successful.  Surviving an opposition proceeding indicated a higher probable patent value.

Of the above factors, Surviving Opposition and Forward Patent Citations were the most important factors.  While the Number of Jurisdictions, Backward Patent Citations and NPL citations were less important, their appeal is that this information is available immediately after a patent is issued.

A couple of other items to note were:

As a result of the America Invents Acts of 2011, the US Patent and Trademark Office has implemented opposition procedures analogous to the German procedures.  These are called Post Grant Review and Inter Partes Review.

The article also provided some insight into what the authors call sleeping patents.  These are patent that are held by companies that are not used or licensed for commercial purposes.  This concept is at the heart of the many “patent troll” arguments going on today.  The authors argue that while there is no direct value in a “sleeping patent,” there is significant indirect value.  For example, a company may own patents to two different technologies that produce similar product improvements.  In this example, the company would select one technology to implement the improvement but continue to maintain the other patent to protect against competitors using the alternate technology to make the same improvement.  While this seems like a minor point, 1/3 of the companies in the survey used this strategy.

Below is a summary of selected patents that have been recently issued in textile related classification codes:

Head guard:  A head guard with a fabric layer and a padding layer. The head guard can be worn by a wearer in combination with a helmet.  Patent #:  8613114.  Inventor:  Velasco.  Assignee:  2^nd Skull, LLC.

Article of footwear incorporating foam-filled elements and methods for manufacturing the foam-filled elements:  A shoe with a sole structure multiple support elements made of a shell with an empty core. The core is filled with polymer foam material of at least two of the support elements may have different densities.  Patent #:  8613122.  Hazenberg and Schindler.  Nike, Inc. 

Footwear device:  This is a device mounted in a shoe, or worn as a sock, that biases the ankle of the wearer to improve athletic performance.  Patent #:  8613150.  Inventor:  Wong.  Assignee:  Wong.

Stitched multiaxial non-crimp fabrics:  A multiaxial non-crimp fabric comprising at least two superimposed layers of multifilament reinforcing yarns arranged within the layers parallel to each other and abutting parallel together. The reinforcing yarns within one layer as well as adjacent layers are connected and secured against each other by sewing. The reinforcing yarns of the layers are symmetrically arranged in respect to the zero-degree direction of the non-crimp fabric and form an angle α to the zero-degree direction, the angle not being equal to 90° or 0°. The sewing threads have a linear density from 10 to 35 dtex.  Patent:  8613257.  Inventor:  Wockatz.  Assignee:  Toho Tenax Europe Gmbh.

Cellulose fibre based insulation material:  An inexpensive and voluminous fiber product is achieved having good spring elastic properties as well as good sound and heat insulating properties.  The composition is 50% to 90% cellulose fibers, 2% to 20% synthetic fibers, and 2% to 20% bi-component fibers comprising a core and an outer sheathing, said outer sheathing having a lower melting point than the core.  Patent #: 8614154.  Inventor:  Anderson.  Assignee:  3M Innovative Properties Company

Textile fabric for the outer shell of a firefighter's garment:  A textile fabric for use as the outer shell fabric of a firefighter's garment. The fabric is made of spun yarns and multi-filament yarns made of a combination of aramid, PBI or PBO or melamine formaldehyde staples.  Patent #:  8614156.  Inventor:  Hess, et.al.  Assignee:  PBI Performance Products, Inc.

Jim Carson is a principal of RB Consulting, Inc. and a registered patent agent.  He has over 30 years of experience across multiple industries including the biotechnology, textile, computer, telecommunications, and energy sectors.  RB Consulting, Inc. specializes in providing management, prototyping, and regulatory services to small and start-up businesses.  He can be reached via email at James.Carson.Jr@gmail.com or by phone at (803) 792-2183.