Patents: Should We Change Our Intellectual Property Model/Strategies?

By Girish Malhotra

In the last thirty-five years about 351,000 US patents (1) were classified in 424 and 514 class category i.e. they are drugs related. This translates to about 10,000 patents per year. I am told that an average US patent (2) (up to 20 pages. Costs go up as the number of pages increase) over its life cost the assignee about $15,000 to $18,000. I am also told that the patents filed in Europe cost about four to five times the US patent costs. European patents are not part of the discussion. However, the readers can use the information of this discussion to draw their own conclusions.

Based on number of patents granted per year, companies spend about $150.00 to $180.00 million per year. These costs are less than 0.5% of the annual pharmaceutical revenue of about $800 billion per year, a very insignificant cost. Just for enlightenment purposes 351,000 patents over thirty-five years cost companies about $ 5 to 7 billion dollars for the US patents only.

Good side of this expense is that they give companies a hold on their invention for the life of the patent and are every bit worth the expenditure. However, the question is how much information is being shared with competitors, how they are using the information and what is the total damage caused to the companies by this sharing. In addition, another question is what is the percentage of revenue generating patents. I wonder if such an analysis has been ever done.

We all understand that before the Internet Age, information had to be manually retrieved. Now we can search information in seconds just by using certain carefully chosen words. Before Internet we used the best methods available for the time and still missed relevant documents. Missed information could invalidate the patent.

Patents are an open book. They facilitate learning, an excellent teaching tool, show us how to circumvent, improve our processes, develop better process and product and even show us how to infringe. They give us a head start. This is especially true for process patents. This is my learning from patents. Compositions of matter patents also do the same. Unless someone is aware of infringement, companies do not have the manpower to police.

Few questions come across. They are:

  1. If a patent cannot be policed, what is the value of the patent?
  2. Do the patents have defensive or offensive value and what are they worth if they cannot be policed?
  3. What kind and how much financial damage the information disclosed in the patent causes and has been caused to the companies especially when the patents are invalidated due to lack of proper prior art search?
  4. With the advent of Internet should the patent strategies be reconfigured/rebooted?
  5. Should the intellectual property model be reevaluated?

I do not have the answers to the above but I am sure there are many pundits and gurus who are and will address the questions and have the answers. I wonder if there would be a pro and con debate. We all know there is value in patents but the question would be value for whom, what kind and at what cost.

The above questions and comments are based on my recent analysis of an API molecule synthesis. Of the three patents first was the original innovation filing. The second two patents are a variation of how to synthesize the same chemical differently. Same molecule is being synthesized using same and similar chemicals. There is no innovation when it comes to chemistry or process simplification. Yield was significantly compared to the original patent. Money was spent but I am not sure of the value. New patents basically taught how chemistry could be altered and possibly simplified.

I am not challenging wisdom of having patents but asking a question “Is it time to re-visit IP strategies to make sure we are not giving away the store?” A re-evaluation might be of value as it could have some impact on how the IP business is conducted.

1. Patent Counts By Class By Year 
JANUARY 1977 — DECEMBER 2011, accessed September 19, 2012

2. Private Communication with Mr. Stephen Grant, Attorney Standley Law Group LLP September 19, 2012

[This post originally appeared on the Profitability through Simplicity blog.]

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