Wednesday, October 15, 2014

The Patent Paradox

The question has plagued economists for so long that they finally had to name it.  It’s called the Patent Paradox and the question is this:   Why are there so many patent applications given that most patent turn out to be worthless? 

I addressed a part of this question in an earlier post but that discussion was focused more on the value of patents.  While fewer patents are as worthless as conventional wisdom would lead you to believe, it is also clear that there is a “lottery ticket” aspect to the potential value of a patent where a small proportion of patents represent the bulk of patent value. 

Still, the question is valid.  If a quarter of patents won’t cover their procurement costs and half of all patents are probably worth less than three times their procurement costs, why do so many companies go to the expense and aggravation of applying for a patent?

In Patent Portfolios, Gideon Parchomovsky and R. Polk Wagner propose an explanation of this paradox.  Their proposal is that patents should not be evaluated in isolation but should instead be evaluated as part of a broader portfolio.  Their belief is that the value of a patent portfolio will be greater than the value of the individual patents. 

The proposed mechanisms that drives this increased value are improvements in scope and diversity.  The idea behind their concept of scope starts with a simple observation:  an individual patent can only protect an individual innovation.  What Parchomovsky and Wagner point out is that by acquiring patent protection for a range of innovations that are related to a targeted market it becomes possible to create a “super patent” that can be used to more broadly defend the entire target market.

The idea of diversity is that multiple related patents are easier to defend in court.  When a company is defending itself in court, the risk is that the court will find that the underlying patent is invalid.  When patent protection is spread over multiple patents even if  a court holds a single patent to be invalid it is unlikely to find the same defect in multiple patents. 

To be clear, this is a theory.  Parchomovsky and Wagner’s paper was published in 2005 and is well known in the literature, the truth is that it is just the opinion of two academics.  While the paper provides case studies, makes some predictions and generally makes sense, I have not found a study that empirically confirms, or even tests, this proposition. 

Hopefully, something is in the works.

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

Yarns of polyoxadiazole and modacrylic fibers and fabrics and garments made therefrom and methods for making same:  This invention relates to a flame-resistant spun yarn, woven fabric, and protective garment, comprising a blend of 60 to 85 parts by weight of polyoxadiazole staple fiber and 15 to 40 parts by weight modacrylic staple fiber; based on 100 total parts of the polyoxadiazole staple fiber and modacrylic staple fiber in the yarn. This invention also relates to methods for making the yarn.  Patent:  8695319.  Inventor:  Zhe.  Assignee:  E I Du Pont De Nemours And Company. 

 Tufting machine and methodA method for using a tufting machine to produce athletic turf bearing precise graphic tuft patterns at a high throughput rate is disclosed. The utilized machine includes tenter frame and a series of tufting frames upon which tufting head components are mounted. The entire length of a piece of backing material is wrapped around the tenter frame, and the tenter frame circulates the backing past the tufting frames, and the tufting head components are shifted as may be necessary to form a desired graphic tuft pattern.  Patent:  8695519.  Inventor:  Bearden.  Not Assigned

Fire retardant panel compositions:  A fire retardant structural board is provided that includes a body of fibrous material, a triglycidyle polyester binder, a sodium borate pentahydride fire retardant, and a sodium borate pentahydride fire retardant. The body of fibrous material has a weight, first and second surfaces, first and second sides, and a thickness. The fibrous material and triglycidyle polyester are dispersed throughout the thickness of the body. The sodium borate pentahydride fire retardant is dispersed between individual fibers of the fibrous material and throughout the thickness of the body. A sodium borate pentahydride fire retardant composition also coats at least the first surface of the body.  Patent:  8697586.  Inventor:  Balthes,  Assignee:  Flexform Technologies, Llc

Nanowebs:  A nonwoven web of fibers that have a number average diameter of less than 1 micron. The web can have a Poisson Ratio of less than about 0.8, a solidity of at least about 20%, a basis weight of at least about 1 gsm, and a thickness of at least 1 micrometer.  Patent:  8697587.  Inventor:  Arora,  Assignee:  E I Du Pont De Nemours And Company. 

Surgical Bra with Mastectomy Kit:  A surgical compression bra for patient support with a mastectomy kit. The surgical bra includes a body portion with a releasable front closure, shoulder straps with releasable closures, an internal pocket, adjustable poly filled pad prostheses, and a detachable mastectomy pouch.  Patent:  8696403.  Inventor:   Haley.  Assignee:  Bras To Help Save The Ta Tas, Llc

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 or by phone at (803) 792-2183.

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