Make the most of your business patent

01:12, Jan 22 2014

The Government seeking feedback to proposed changes to the Patents Act 2013 is good news in regards that there is a move to bring New Zealand's patent laws up to date.

However, the real problem in New Zealand is not outmoded patent laws, but a failure by New Zealand businesses to understand that simply having a patent means nothing. It's what you do with it that counts.

Unfortunately most businesses do very little with their patents. The US Patent Office recently reported that 97% of patents never make any money for the inventor. The Federal Trade Commission cited an even lower rate of success: less than 1%. It seems inconceivable that any company or inventor would hand over large amounts of cash for an asset that has less than a 3% chance of generating a return (you are better off at the Roulette table with those odds) but regardless they do.

This doesn't mean patents are "bad". Patents can in fact be incredibly valuable. Unfortunately they can also be a total waste of time and money. What is remarkable however is how often companies spend substantial amounts on patents but never stop to check what their return - on this spend - really is.

When faced with this situation a patent owner should ask three simple questions:
1. Have you licensed these patents to anyone?
2. Have you litigated (enforced) these patents against anyone?
3. Do you have an active program to sell these patents to a third party and are they interested in buying?

Over the long term if the answer to these three questions is "no" there is absolutely no point in having a patent.

The answer lies in the nature of patents: a patent is sword not a shield - you need to actively use it to generate value. You can extract that value in three fundamental ways:

1. By convincing a third party to pay you to use your patented technology. This could be a one off fee, an on-going royalty, a premium on the product relative to competitor products or even a commitment to buy the product. You could also ask them to stop using your technology all together to secure market share.

2. If asking politely doesn't cause them to cough up money or do what you want, you either walk away or sue and recover sufficient damages or other advantages (injunctions, suit dismissals etc) to offset what are likely to be substantial litigation costs. In New Zealand these are about $250K for a high court trial, in the US they start at approximately $1.5 million. Large bets on long odds indeed.

3. Recent years have seen the emergence of patent markets so you can try to sell your patent. The value of your patent is essentially a function of points (1) and (2). That is, if it's not capable of generating income or being a useful weapon in a patent litigation suit then its effective value is likely to be very low or zero.

So if you're not doing one or more of the actions outlined above (if you're not wielding the sword or selling it someone who can) there is no point in having a patent at all. Put simply: patents sitting on the shelf have zero value regardless of what you paid for them or what your patent attorney tells you they are worth. It also pays to note that patents are perishable: they have a finite life and every week their potential value ebbs away. Just like a sword, eventually they rust away.

Paul Adams is CEO of EverEdge IP - an intellectual property strategy and technology commercialisation firms. He has been named one of the world's top IP strategists and was the recipient of the Outstanding IP Leader Award in 2012.