Thursday, March 26, 2015

Different Values

Over the last year or so I have written about several studies of patent valuation.  While each of these studies had strengths and weaknesses, one common weakness they shared was that these studies were so general that they provided little practical guidance about the nuts and bolts of evaluating a specific patent. 

Fortunately, in 2013 Larry Goldstein published a more practical view of patent valuation titled True Patent Value:  Defining Quality in Patents and Patent Portfolios. 

In True Patent Value, Goldstein starts with a basic premise:  a patent will have no value until the patent is infringed.  While this is obvious for patent awards derived from infringement lawsuits, the statement is equally true for licensing fees and the sales of patents.  The reason is that people will not license or purchase the patent rights for technology unless they intend to use the technology and wish to avoid infringement.  Alternately, they may purchase the patent rights to pursue somebody else who may be infringing.  In either case, the patent doesn’t generate revenue until the technology is infringed.

Most of the rest of the book is dedicated to the observation that a patent can only have value if it is enforceable.  And, unfortunately, in Goldstein’s model the only way to determine enforceability is to actually read, understand, and evaluate the patent in question.  Goldstein defines three evaluation criteria for enforceability:  the validity of the claims, the scope of the claims, and the discoverability of the infringement of the claims.

Validity:  While the presumption should be that the claims are valid, in truth courts often find that claims that the USPTO should not have allowed.  There are many reasons that claims may be held invalid.  There may be prior art that wasn’t discovered in the patent search.  There may be a change in the patent law that impacts the claim.  Or a flawed claim may have been approved in error.  

When evaluating a claim for flaws one should look for clear terminology, support in the specification, and unusual usage of a key term in the claim.  By clear terminology is meant that terminology should be used consistently throughout the claim or claims.  Two terms should not be applied to describe the same item or concept nor should a single term be used to describe two different items or concepts.  By support in the specification is meant that the terms used to describe the boundaries of the invention within the claim should be the same terms that were used to describe the invention.  In addition, all the key terms used in a claim should be described or defined in the specification.  By unusual usage is meant the use of a well known term in a non-standard way.  While the rule is that “an applicant may be their own lexicographer,” it then is incumbent on the applicant to clearly define how they are using their terms within a specification.  Unless the specification clearly states otherwise, the plain meaning of a term will be used when interpreting a specification.

Scope:  The specific question that scope answers is: how easy is it to design around a patent claim?  In general, the more detailed the claim, the easier it will be to design around.  However, broader (less detailed) claims will often run into conflict with prior art. 

Discoverability:  If a patent’s value derives from infringement, then it follows that the infringement has to be detectable.  Generally, features of a claim that are related to the final product, and even better are visible, will be more readily discovered than claims involving manufacturing procedures and methods.

Once the scope, validity and discoverability of a patent have been determined, Goldstein’s experience (which is considerable) is that a good financial analyst familiar with the market the patent is in should be able to build a reliable financial model that estimates the market segments the patent is being infringed in as well as an estimated cash flow from those segments.

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

Cushion having damping properties:  A cushion having damping properties for use in bicycle pants that includes an outer shell and a core surrounded by at least one layer with filler material between the layer and the core. A valve is provided in the outer shell to control the passage of air to and from the core and interior cavity. The damping properties of the cushion can be changed by inflating or deflating the core with air.  Patent 8776276.  Inventor: Lambertz.  Assignee:  X-Technology Swiss Gmbh.

Beach sandal:  Footwear including an upper, a porous insole, a midsole, and a solid outsole. The insole has pores that permit sand to fall through the insole. The midsole includes a top surface with a plurality of grooves extending lengthwise between openings on the rear surface of the midsole and openings on the front surface of the midsole.  Patent:  8776396.  Inventor:  Huynh.  Not Assigned: 

Ankle inversion and eversion prevention shoe: 
An ankle inversion and eversion prevention athletic shoe has an upper foot support portion and a shoe bottom. The ankle inversion and eversion athletic shoe device is designed for preventing an athlete from spraining or turning or rolling an ankle during normal athletic competition or play or activities. The shoe includes a brace. The brace is located either behind the ankle on a heel of the shoe or on a side of said shoe in the general vicinity of the ankle. The brace includes an elongated arm and a floor contact surface designed to limit or control sliding of the foot to enable wearer time to regain composure, footing and balance. The brace provides the wearer time to regain his or her balance onto the shoe bottom, thus significantly limiting or precluding the typical and usually unavoidable ankle injury. Patent:  8776402.  Inventor:  Cromer.  Assignee:  RTC3 Llc.

Natural polymeric yarn and its fabrication method as well as application:  A method for fabricating natural polymer yarn comprising the following steps: (a) forming a natural polymeric long fiber by wet spinning or electro spinning from a natural polymer solution; (b) combining the natural polymeric long fiber and at least one polymeric fiber by a false twist texturing process to form a natural polymeric yarn. By means of a false twist texturing process, the natural polymer yarn with enhanced tensile strength and elongation could reduce the drawback of conventional wound dressing products which lack strength and stretchiness in a wet condition.  Patent:   8776490.  Inventor:  Tsao.  Assignee:  Coreleader Biotech Co., Ltd.

Finally, I would like to end this week with a shameless plug:  RB Consulting Inc has just launched a website that I would like to invite you to visit.  My prior blog posts are available on the site.

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 jim@rbconsulting,us or by phone at (803) 792-2183.

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