Why Should You Kill Patents?

Renewing a patent is a major decision that individual patent assignees and companies need to make. Generally, utility patents expire after 20 years from the application filing date if the maintenance fee is not paid, thus no longer protecting it from enforcement.

Nearly all patent application owners have limited budgets for patent validations and renewals. Hence, their primary consideration is often deciding the countries in which the patent application needs to be validated and maintained until it is granted. Since patent fees represent a significant cost, a decision to pay such fees must be analysed and justified.

While the decision to continue or abandon a patent application is determined on a case-by-case basis, here are some considerations a patent applicant can look into while making the renewal decision:

  • Commercial: This is the most important and often the determining factor to either abandon or renew a patent application. The commercial value of an invention protected by a patent status holds great significance. This is often weighed against the anticipated or resulting RoI of the invention, forecasting profits. While profits play a key role, this is not the sole reason to renew or abandon a patent’s maintenance.
  • Nature & Value: Patent validation and renewals also depend on the nature and value of products and businesses, depending on where a granted patent offers direct or indirect value.
    The direct financial value of a patent or patent application per se, is the value of the potential profits accrued from fully exploiting the invention defined by the patent’s claims in the patent’s presence compared with those obtainable without patent protection.
    Indirect value comes into play when converting competitors to customers, attracting licence fee patents, which indirectly contribute to shareholder value by preserving business and deterring other from suing the company, etc.
  • Selling, gifting and licensing value: When one sells a patent, he/she is guaranteed a quick payoff for your idea. Selling a patent allows the inventor to generate income that can be used for a start-up. Licensing the right to make, use, or sell your product is usually the most profitable route for inventors. As a patent holder, one retains ownership of the invention and earns royalty payments on future sales of the product. One can also grant an exclusive license to one company or several companies.
  • Marketing tactic: Sometimes, the existence of a patent portfolio or just a number of pending patent applications helps a company market its value through its R&D function to funding agencies, venture capitalists, business angels or end users of a new or improved technology.
  • Prevent design-around: An assessment of the breadth of allowed claims can be weighed against a patent application’s ability to prevent “design around” or obtain a license, thus allowing the applicant to decide on a renewal.
  • Contractual obligations: Contractual obligations related to patents or patent applications may justify the payment of a maintenance fee. Abandoning a patent or application may cause an entity to be in default of a contractual obligation. For example, a patent owner cannot abandon a patent without risk if a licence related to this patent is still in force. It is also important to maintain a patent when it is linked to any judicial proceeding related to infringement.
  • Patent Family: If a patent or application is part of a family of patents, payment of the maintenance fee can be justified by the simple fact that it is linked to an invention protected by another patent within the family. Moreover, a patent or application which is the basis of a new technology or improvement deserves to be maintained until the new technology has proven itself on the market.
  • Economic Environment: It is important to analyze the evolution of the economic environment of a patent application vis-a-vis the industry. Is the market growing? Is an economic crisis expected? What is the state of the market? What are consumers’ habits? What is a company’s positioning with regard to competition? In an economic crisis, for example, certain competitors may lose steam and make drastic decisions to reduce their costs with respect to R&D and patents. But if a company prioritises to invest in patents, or at least continue paying the maintenance fees, it may find itself in an advantageous position when the market eventually recuperates.
  • Legal Monopoly: A patent offers a legal monopoly to its owner within a specific market. Therefore, even though a patent may no longer be of interest to its owner, maintaining the patent may be justified through the desire to restrain competitors within certain territories as a “defensive strategy”. Furthermore, it may be useful to maintain certain patent applications, even if patentability of the invention is uncertain, since the application provides a “patent pending” status which could allow the patent applicant more credibility to approach potential partners, clients, or investors.

Disclaimer:

The various factors presented above do not represent an exhaustive list to be considered in the decision-making process of paying patent or patent application maintenance fees. Moreover, each of these factors must not be considered in isolation; they are complementary with one another and one is not more important than the other.

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Dr. Nalini Mohan Koutha
Dr. Nalini Mohan Koutha

Dr. Nalini is a Pharmaceutical patent expert and has extensive experience as a technical and Intellectual Property Specialist in Generic Pharmaceutical manufacturing. His quest for analytical thinking extends to his deep interest in philately.


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