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Three Cardinal Rules of Patent Portfolio Management

We have been building and managing patent portfolios for over two decades, either as technology developers who had to rely on IP protection for durability and protection of our product business, or as IP portfolio managers on behalf of innovative companies and ivy league universities. Although no two technologies and no two patents are the same, there are some best practices that one can observe to serve well in every situation. There are three rules of patent portfolio management that are especially important and constant over changes in the regulatory environment as well as changing technology trends.

First rule is to never close patent prosecution on key patent families no matter the cost. This also implies that one has to be immersed in the technology and IP enough to be able to judge which exactly are likely the key patents. It is rather rare that the initial set of claims filed/issued in a patent family are the most valuable claims. In practical terms, that never happens absent a fluke. One can point to exceptions in endeavors such as bio or pharma where years of research culminates in a mega patent application with hundreds of patent claims. But again, those are exceptions. For most technologies, the initial set of claims that issue in a patent family do not anticipate and cover the state of technology several years down the road. Even for patent applications with robust patent specifications and lots of enabling detail, the applicant has to select one specific group of embodiments for the initial set of claims. Once the patent prosecution is closed, there is no ability to claim any other aspect of the invention disclosed in the patent specification. The game is over. However by keeping open prosecution in a patent family, in other words making sure that there is always at least one patent application pending at any time based on the same specification, the applicant can assure that the rightful patent rights will not be lost due to a technicality. Filing and prosecuting patent applications continually does represent expense, of course. So the rule should be applied selectively only to those patent families that one expects to become key.

The second rule is to trim the patent portfolio time to time. No organization has endless resources. One can perhaps consider some of the largest corporations as exceptions to this statement, but again, we are not concerned with the largest corporations here. Given the limitations on resources, it is prudent to review the patent portfolio time to time and trim it by either not pursuing patent applications any longer or even considering not paying patent maintenance on patents that are not likely to represent economic value any time soon. It is really as simple as maintaining a stock portfolio in that you should know what you have and why you have it. Every patent family should have a rationale as to why it does or will represent economic value for the company. At any point in time if the rationale no longer holds true, either because the technology or the market evolved in a direction that made the patent irrelevant, then one should not spend any more resources to pursue or maintain assets in that patent portfolio – regardless of the sunk cost.

The third rule is to allow certain level of resources to be spent on pursuing technologies and seeking patent protection on initiatives that fall outside of the first and second rule. In other words, one should build speculative ‘long-shot’ technology initiatives and respective patents in their portfolio by spending a certain portion of their resources. What that portion ought to be is dependent on the nature of the business and risk tolerance of the patent holder. A rule of thumb may be around 15%. One can view this investment as insurance policy against abrupt shifts in technology or product trends, as well as high-risk high-return investment that can create strategic options for the business. Either way, the portfolio ought to include some number of long-shot investments. The critical thing is to avoid such speculative investment from being confined to the pet projects of certain managers in a company.

As we started this piece by saying that no two situations are the same, we will finish repeating the same. The rules above are general guidelines that emerged from managing portfolios and observing others’ mistakes for years. They provide the basis for at the least avoiding the biggest mistakes that companies make in protecting their intellectual property.

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