Make Money (and Don’t Waste It)!

By Lily Li

Patents have intrinsic value beyond their contribution to your company’s product lines. After all, patents are the physical embodiment of your company’s technological genius, just as stocks and bonds embody the value of your company’s other intangible assets. Instead of letting your patents go to waste, treat your patent portfolio like your stock portfolio – strategically buy, sell, and market your patent rights for a profit.

License Your Product: Many companies patent their technologies as common practice. As these companies develop new product lines, however, many patents are forgotten and relegated to the corporate dust heap. This is a bad idea. The costs for maintaining a single patent over its lifetime can be as high as $1 million, due to filing costs and annual renewal fees. Why throw money away when you can license these patents to other companies?

Microsoft has aggressively pursued a licensing policy with competitor companies, squeezing every last dollar of value from its patent portfolio. For example, Microsoft claims patents on a fundamental technology behind the Android smartphone. With recent agreements with Wistron and Quanta Computer and Compal Electronics, Microsoft now receives royalty payments from over half of Android sales. Given that over 60 million smartphones were sold in 2010 with the Android operating system, Microsoft stands to gain millions of dollars from patents that would otherwise gather dust in the company’s filing cabinets.

If you still do not think licensing is important to your company’s business model, the recent acquisition of Mosaid may change your mind. Mosaid is Canada’s leading patent licensing and intellectual property development company. The U.S. private-equity firm Sterling Partners agreed to acquire Mosaid for a whopping $593 million dollars, in part due to core Nokia and Microsoft wireless patents controlled by the company.

Sell Your Portfolio: Despite a company’s best efforts, sometimes a product just does not sell. In these cases, the patent portfolio may be the last valuable asset left in your company. Shoring up your company’s patent portfolio ensures a better exit, whether it is through acquisition or bankruptcy.

Nortel Networks is the quintessential tech boom and bust company. This fiber optics master and $250 billion telecommunications giant in the 1990s never quite recovered from the 2001 and 2002 recession, and filed for Chapter 11 bankruptcy in January 2009. Not all was lost, however. Even after bankruptcy, Nortel Networks portfolio was highly sought after due to key wireless, networking, and semiconductor patents. In a bidding war that started with Google, Nortel managed to sell its patent portfolio (6,000 patents) for $4.5 billion to a coalition of Apple, Microsoft and other competitors. The $4.5 billion patent sale was more valuable than the combined figure for all other Nortel asset sales following its bankruptcy.

Get Invested: Research out of MIT suggests that companies are more likely to raise capital if they have patents and manage them actively (see http://mitsloan.mit.edu/newsroom/2010-hadzima.php).  Merely filing patent applications is not enough, however. According to MIT Sloan Senior Lecturer Joseph Hadzima Jr., “The future winners will be those companies that used the rough [economic] times to put together intellectual property strategies that support their broader business strategies.”

File Patents Strategically: Do not waste your time and money filing patents indiscriminately on every new invention. As previously stated, the costs for maintaining a single patent over its lifetime can be as high as $1 million, due to filing and renewal costs, potential litigation costs, and hefty attorney fees. Instead, save money by only filing applications on strategic patents – those that help you defend your core technologies, bracket competitor technologies, create licensing opportunities, or increase your company’s attractiveness for acquisition.

[This post previously appeared on CleanTech PatentEdge ]

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