This is the second in a series of posts about technology landscapes, also called patent landscapes. In the first post, Why I Hate the Phrase "Technology Landscape,” I point out that the phrase “technology landscape” is used to describe everything from a $1,000 offshore basic patent search to a $200k high-end consulting engagement with strategy consulting firms or a law firm billing by the hour.
We presented four separate cases, each with different reasons for wanting a technology landscape. In this article, we’ll examine the first case, the multinational company looking to monetize their patents.
Case 1: Major Operating Company - Patent Monetization
The multinational company, which we’ll call BigCorp, with a significant investment in patents, an in-house patent staff, licensed patent software, and patent databases contacted IPVision for assistance investigating a business strategy. The company’s internal technology landscape team consisted of a number of PhDs, patent search experts, and lawyers.
The internal technology landscape team was looking to identify patents within a specific technology area to determine if a strategy of patent monetization of BigCorp’s existing patent portfolio made sense. In other words, they were trying to find companies that might be candidates for licensing or sale of BigCorp’s patents.
The internal team had developed a technology landscape that had tons of patents, but they had no way in which to filter out the noise. As you might imagine, the manager was getting frustrated.
Questions and Process:
Do You Know Your Own Patent Portfolio?
The first set of questions we asked related to BigCorp’s own patent portfolio. It’s surprising how often I find companies that don’t really understand their own patent portfolio.
Why does this matter?
If a company is thinking of monetizing an existing portfolio, then it really needs to know what in the portfolio is important to the company’s current and planned business activities.
- Which patents support what products or services?
- Which patents are strong? Which are weak?
- Which patents are the most valuable?
Going through the process of understanding your own patent portfolio causes you to think about the components of value and patent strategy.
Seller - Patent Monetization Motivations
The next question is: Why is BigCorp looking at patent monetization strategies? Here are some of the typical reasons given from the viewpoint of the patent owner/seller/licensor:
- Competitor infringement: We think our competitors are infringing on our patents
- Non-competitor infringement: We think non-competitors are infringing on our patents
- Changed business: We aren’t in this business any more
- Changed strategy: We don’t want to pursue this new technology opportunity
- Adjacencies: We think there are other application areas that are not in our current business strategy
Many people presume that an industry study (technology landscape) is not needed to deal with competitor infringement and that patent monetization is a matter for the lawyers. Most companies will not sell patents to a third party to go after a competitor. They want more direct control.
However, there is a reason a technology landscape can be very helpful in these situations, and that is the importance of understanding what the competitor has or can acquire. You don’t want to go after a competitor with a rifle only to be met with a cannon in the form of a countersuit from the competitor’s existing patent portfolio. You should also be careful to tie up key patents that can harm you. You don’t want any loose cannons on the deck. IPVision has help more than a few companies find patents to acquire as ammunition in the middle of patent litigation.
Competitor infringement goes to the core of the company’s business. Infringement by non-competitors is another matter. Most companies think twice about suing non-competitors for infringement, because it’s a potential distraction and can boomerang in adverse publicity.
If the patents at issue are not the crown jewels of the portfolio, the company may be willing to sell the patents to a third party, retaining a license for the seller. In this case a technology landscape can frame the opportunity for both the company and any potential buyer by providing data, information, and knowledge about who is in the technology space and who should be investigated for possible infringement.
Changed Business, Changed Strategy, Adjacencies
These three patent monetization motivations can be roughly called “technology transfer” cases. The thought here is that there is non-litigation value in BigCorp’s portfolio that is not currently being realized and is not likely to be pursued by the company. The purpose of an industry study in the technology transfer case is to identify potential purchasers or licensees of BigCorp’s off-strategy applications. In most cases there will be some form of non-patent technology know-how transfer.
For the non-competitor infringement case and the three technology transfer cases, we need to think about value.
Building the Case for Value
There is an old saying in financial circles: “Stocks are sold, not bought,” meaning that you must build a case for value before someone will buy. Stocks and patents are alike in at least one important way: It is really hard to figure out what their values are without analyzing them in detail.
In the financial industry, there is a common set of metrics and measurements that have evolved over the years. In the patent arena, there are some powerful metrics that have been developed in the past ten years, including by IPVision, that are beginning to become more widely recognized.
In patent monetization, a key determinant of patent value is the use to which the buyer will put it.
Acquirer – Patent Acquisition Motivations
Other than to settle or avoid a direct infringement claim, why do people buy or license patents?
- Monetization intermediaries – Buy patents to assert
- Open innovation – Acquire new products/services
- Litigation ammunition – Defensive ammunition
- In my technology/product area
- In other areas where my competitors operate
- Litigation immunization – Keep patents away from others
In each of these cases, an industry study provides a starting point to crafting a valuation story and strategy. The technology landscape will identify the players in the space and their historic and current activities. It will help identify new entrants and it will provide a basis for predicting trends. These are just the basics however.
There is a good deal of business intelligence embedded in patents. Patent activity reflects technology investment activity by the patent applicant. A key component of an IPVision industry study is the interactive sessions we hold with key management stakeholders. We work with them to understand the business significance of the results and to develop strategies and on-going processes to make use of the knowledge obtained and the results delivered on the IPVision Advantage™ Analytics Platform. Through these sessions, management develops new ways of thinking about intellectual property from a business perspective, which lasts well beyond the immediate task at hand.
Take, for example, the patent monetization scenario of litigation immunization, as mentioned above. In our industry study for BigCorp, we used IPVision patent analytics to determine the strength and weaknesses of BigCorp’s offered patents.
We then looked at the direct and indirect citation landscape to identify potential purchasers. Then we ran IPVision patent analytics on the most closely relevant patents of each of the potential purchasers. Using this data, we conducted working sessions with BigCorp stakeholders where we walked through various “what if” scenarios, such as what would Company A’s portfolio look like relative to Company B if Company A acquired the BigCorp patents? These data and this process help BigCorp craft a valuation case for why Company A or Company B should purchase the BigCorp patents.
Technology Landscape – Only the Beginning
As you can see, “technology landscape” means different things to different people in different contexts. At best, a technology landscape is only the beginning, the data which inform business questions and business decision making. At IPVision we prefer the term “industry study,” which starts with a technology landscape, with the results/data delivered on our online analytics platform for use by the client, and with interactive sessions to develop and transfer an actionable knowledgebase to key management stakeholders to enable better business decisions and outcomes.