5 tried-and-true steps to increase the ROI of your patent portfolio
Intangible assets, such as patents, are essential to a company’s financial performance and CFO’s are increasingly giving patents more importance on a company’s balance sheet.
However, developing a strategy that can increase the ROI of your large patent portfolio can be difficult and time consuming. So, I will discuss 5 tried-and-successful steps from some of the largest patent filers, to help you manage and increase the value of your patent portfolio:
- Centralise your IP to identify all your intangible assets
- Conduct an IP audit to identify valuable and weak patents
- Involve senior business leaders in IP strategy conversations
- Abandon useless patents to save on unnecessary maintenance fees
- License unused patents to monetise your portfolio
1) Centralise your IP to identify all your intangible assets
With larger patent portfolios, it can be difficult to identify all your valuable and weak patents—especially if they are dispersed across different locations and departments. One way to avoid this is by centralising your IP, which is the approach that Xerox took in the early 90s when Rick Thoman was appointed as the new CEO. Initially, Xerox’s patents were scattered throughout different divisions. However, after Thoman joined, he centralised the company’s IP under Xerox Intellectual Property Operations (XIPO). This was to ensure that the IP strategy was developed with the interests of the entire organisation in mind, not just those of the individual business units. There might also be valuable patents in other jurisdictions of which you may be unaware.
Centralising your IP portfolio provides a clear and comprehensive overview of the patents in your portfolio, equipping you to make well-informed decisions.
2) Conduct an IP audit to identify valuable and weak patents
You should conduct an IP audit after identifying all the patents in your portfolio because this can show which patents to abandon, renew, sell or license. This can help your business reduce costs from renewal fees and monetise patents to improve the ROI of your portfolio. One famous example of a well-executed IP audit was Dow Chemical’s, in the early 90s.
Dow didn’t have a well-established IP strategy and as the early 90s recession hit, it was forced to review its assets. Dow decided to conduct a year-long IP audit (which would now take a couple of days, thanks to automation tools). By doing this, it identified 29,000 valuable patents in its portfolio, which were assigned to individual business units. The IP audit helped Dow save $50 million in tax and maintenance fees, from either cutting unneeded patents or donating them to universities.
3) Involve senior leaders in IP strategy conversations
IP plays a critical role in improving a company’s financial health and therefore, discussions on IP management should not be limited to the IP department. According to Dr Dimech-DeBono from FTI Consulting, IP is becoming a larger part of a company’s balance sheet but there are certain behaviours that prevent companies from maximising IP assets—such as failing to integrate IP mangers or R&D teams into conversations about strategy.
Senior leaders should regularly discuss patent strategy to ensure it’s developed to serve the interests of the entire organisation. For example, Biotronik’s strategy involves auditing its patent portfolio with the IP review board as well as R&D leaders, to decide which patents to abandon and which to license. Furthermore, after Rick Thoman became Xerox’s CEO, he implemented a new system where senior leaders from IP, R&D, business operations and customer operations got together every week, to shape the IP strategy.
This is useful because R&D leaders are technical experts who may have a better understanding of which patents are valuable (and should be renewed), and which are useless (and should be abandoned).
4) Abandon useless patents to save on unnecessary maintenance fees
The value of an invention is hard to predict at the time of filing a patent. Sometimes patents are valuable immediately after they’re filed because they give you a monopoly. However, as the market matures, certain patents may become less valuable —because the technology they protect becomes obsolete, for example. At such a point, it may be wise to abandon these patents to save yourself from excessive renewal fees.
Businesses that file the most patents, such as IBM, are usually the ones that abandon the most. According to IBM’s Chief Patent Counsel, timely pruning of patents is a strategic approach to managing the company’s patent portfolio. For example, in 2016, IBM abandoned over 4000 patents from its portfolio.
5) License unused patents to monetise your portfolio
If you own patents covering technologies that you’re not involved in commercialising, it may be worth licensing and monetising them. This approach was taken by Honeywell, after it did an audit of its portfolio. It noticed that some of its unused patents on autofocus technology was being infringed by Minolta. Honeywell's lawsuit against Minolta resulted in a reward of $127 million in royalties. Honeywell then licensed their auto focus technologies to other camera manufacturers and brought in nearly $500 million in revenue.
If the royalties you receive are higher than the maintenance fees of the licensed patents, you can increase the ROI of your patent portfolio.
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