A Repeatable Approach To Portfolio Monetization

To successfully monetize a patent portfolio, it is incredibly important to identify value within it, and to put in the work to prove to third parties and potential partners that that value exists. This exercise can be conducted as a one-off – in direct response to a claim, or in the event that an owner needs to generate revenue quickly – but the greatest benefit to an organization can be realized by developing a monetization program that results in a sustainable source of revenue generation.

The greatest chance of success in a monetization program comes from a combination of:

  • Gathering Evidence of Use (EoU) based on hard data to help articulate the patent value
  • Linking the EoU to sales volumes or market share
  • Identifying valid patents that address commercial technologies
  • Regular, systematic mining of the portfolio to identify patents of value (in an ongoing monetization program)

This article discusses the processes of establishing patent evaluation methodology and criteria, demonstrating the value of assets in negotiations, and the value in ongoing monetization and evaluation programs.

The Sweet Spot For Patent Monetization

When an organization decides to attempt to achieve value from their patents, there are three key questions that need to be addressed:

  1. Are the patent claims valid?
  2. Is the claim technology in use, or will it be used in the future?
  3. Can the patent holder clearly demonstrate this use and link it to a financial outcome?

The challenge in addressing these questions – particularly for corporations with large patent portfolios – is in identifying patents that fit a specific profile relevant to an opportunity.

Historically, the major driver of value in such discussions was potential infringement. In today’s environment, with the institution of the IPR Process, validity is becoming much more important in these discussions. In fact, many organizations are now seeking two to three validity opinions prior to closing any acquisition of patents, and patent holders are going into negotiation for a licensing deal or patent sale much more proactively presenting validity issues as part of their value proposition.

In examining a patent portfolio for Evidence of Use (EoU), individual patents can be mapped to a quadrant that measures whether each patent is used in existing products, and the verifiability of that detected or suspected use. In the example, patents in the top-left quadrant (the sweet spot) are those where there is verifiable use; these are ideal candidates for patent monetization.

Figure 1: The sweet spot for patent monetization

Unfortunately, very few patents fall into the top-left quadrant – typically 2% to 5% of a given portfolio will drive value in a deal.

Mining For Patents That Drive Value

A systematic, staged approach that combines data analysis and expert opinion will maximize the opportunities to achieve success in monetization.

Organizations looking to monetize their portfolio typically fall into one of three categories:

An organization’s category fit determines where to start in the patent mining process.

  • For those in Categories 1 or 2, start with a more data-driven approach to determine subsets of the overall portfolio to examine further, and then involve Subject Matter Experts (SMEs) for more in-depth analysis.
  • For those in Category 3, involve technical SMEs to examine the patent claims, and to provide their opinions – along with data that supports those opinions, to contribute to claim charts or EoU that can be used in negotiations or patent litigation.

Data-driven Patent Mining

In data-driven patent mining (particularly for those in Category 3) where looking to establish an initial subset of patents to pursue for monetization, the key is to organize the portfolio into groupings that are relevant to the business.

It is important to note that even the data-driven portion of the patent mining activity should involve SMEs. Many organizations use automated tools to develop portfolio taxonomies, but this approach results in the establishment of groupings that lack relevance to the business, and more specifically, to the opportunity at hand. Instead, employ the use of SMEs (internal resources and 3rd party experts as necessary) to determine groupings, and then use automated tools to classify patents into those groupings.

Figure 2: Example gap analysis between patent and product portfolio

The result of this taxonomy development is a quantitative count of patents in each area of relevance to the business. From there, areas of business interest can be identified that have:

  • Sufficient patent coverage – areas with products and related patents. Patents in these areas can be used defensively or assertively in monetization programs, depending on the goals of the organization
  • Insufficient patent coverage – areas with products but no patent coverage. Patents can be acquired or developed in these areas to provide greater protection against assertion, and to protect the IP of the organization
  • Excessive patent coverage – areas with patents but no products. Areas of excessive patent coverage are often fertile ground for patent monetization, as they may offer limited cross-licensing opportunities or responsive patent assertion capabilities
  • White space – areas of interest to the business, but with no patents and no products. Areas where there’s white space indicate future areas for potential development.

Whether each of the above categories can be seen as a monetization tool depends on the philosophies and goals of the owner organization.;

SME-driven Patent Assessment

With the data-driven part of the mining exercise complete, the appropriate subset of patents can be turned over to the SMEs for evaluation of patent strength and enforceability.

To achieve the most valuable outcome from a monetization exercise, SME involvement is a must. SMEs know the technology of a given field, they understand how technology has been implemented across multiple players in a given market, and they can reach a truly informed understanding about whether or not a given patent claim is being used in end product, whether or not that use can be detected, and what issues may be encountered in detection.

Ultimately, it’s human beings who will interpret the claim – in a court of law, in a boardroom, in an active negotiation – so it is vitally important to include human beings as early in the preparatory stages as possible.

Enforceability Assessment Criteria

When conducting analysis, the two key criteria are:

  1. Is the claim technology in use in a product or service in the marketplace?
  2. Is it possible to gather EoU so that evidence can be used to drive negotiation?

Three supplementary criteria which add value are:

Novelty. Are there any prior issues with this patent? Any validity challenges that may arise?

Technical Impact. Is this claim invention a minor improvement, or is it revolutionary? How hard might it be to design around this patent claim while still providing the same functionality in a product?

Commercial Impact. Do the products that are relevant to the claim drive revenue today or in the near future? Is it strategically important to the potential licensee?

Exposure Analysis

In this stage of the analysis, begin to validate the expert opinions of the SMEs with available data. The types of data sources vary from product to product and from company to company. Sources can include:

  • Product literature
  • Data sheets
  • User guides
  • Repair manuals
  • Technical standards relevant to the given technology
  • Pre-existing reverse engineering
  • Product test results

This data permits further evaluation for the potential of success before moving into a detailed infringement analysis.

Infringement Analysis

With the exposure analysis complete, move to the development of a specific claim chart or EoU package.

Figure 3: Every claim element must be supported

A set of test procedures, reverse engineering activities, or data collection activities is designed to gather the evidence required to support every claim element so that the claims chart can be prepared.

It’s important to understand what types of data can best support each element. For example, is the patent related to:

  • Methods of manufacture
  • The resulting structures from such methods of manufacture
  • The function or performance of a given product
  • The implementation of a function or performance enhancements
  • Specific circuit design
  • Specific software design
  • Specific piece of machinery
  • Specific chemical composition

The specifics of the claim, and the specifics of the technology will determine the type of investigation that’s needed, as well as the tools required to gather information that will be used to prove the presence of every claim element in negotiations or a court room.

Larger Portfolio Packages Bring Better Results

In monetization activities, organizations typically look to build packages of patent groups rather than individual patents. Most have between five and fifty infringement contentions for a given negotiation. That number varies depending on:

  • The leverage they have in the negotiation
  • What revenue exposure they have versus the potential licensee
  • The different product mixes involved
  • How broad of a distribution of product types there are in a case

Putting together a value package around the entire portfolio (or segment of a portfolio) leads to a much greater chance of success in achieving a license.

Similarly, when selling assets, the larger patent families – families of hundreds or thousands of assets – sell more frequently than smaller ones.

The Value Of Ongoing Monetization Programs

Many organizations will undergo monetization analysis as a single engagement, and achieve good ROI, but a more effective and beneficial model is to develop this process as a repeatable, sustainable program that delivers revenue and funding back into the business on a more regular basis.

There are many benefits to proactively and regularly assessing a portfolio for monetization potential:

  • Market knowledge: Continuously gathering competitive intelligence provides an understanding of product sales and technology implementation in each of the areas of focus
  • Preparedness: Categorizing a portfolio allows for ready identification of assets relevant to a situation at hand
  • Focus on value: By making an exercise of assessing every patent in the portfolio, the assets that will drive value in a monetization program can be readily identified
  • Adjusting for greater success: Getting regular feedback from the licensing teams involved in monetization allows for ongoing adjustment to programs to ensure that new claims the prosecutors are drafting are supportable and drive success in those areas
  • Adjusting to resolve issues: Getting regular feedback on any recurring issues of validity allows for ongoing adjustment to the program for a greater chance of success moving forward
  • Strategic patenting: Moving into strategic patenting as monetization programs evolve and the portfolio matures ensures that the patents really fit and support the programs; determinations can be made with key technology experts how to drive patent claims into licensable technologies
  • Claims amendment: Instituting continuation practices to amend claims as more information becomes available builds sustainable success into monetization activities.

The first three benefits – market knowledge, preparedness, and focus on value – are applicable to a one-off monetization effort as well as to an ongoing program. The last four benefits – adjusting for greater success, adjusting to resolve issues, strategic patenting, and claims amendment – are, however, unique to ongoing monetization programs.

Developing a systematic, repeatable approach to patent monetization leads to the greatest overall benefit to an organization, ensuring a portfolio is adaptable, future-proof, and readily available as an effective revenue-generating tool.


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Join the Discussion

3 comments so far.

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    September 9, 2017 02:08 pm

    It’s interesting that this valuation system completely ignores the traditional value of patents for providing protection for development and marketing of a new public benefit product – to encourage investments in doing so. Instead, focusing only on what companies might have already developed and sold a product that could be sued for their efforts.

  • [Avatar for Rahul Vijh]
    Rahul Vijh
    September 8, 2017 02:08 pm

    Great article – thanks Mike!

    Another important aspect to portfolio monetization would be prior or ongoing monetization/litigation on the same portfolio, which can greatly drive up or drive down the royalties.

    For example, if a patent has been successfully litigated in the past – that’s a formidable hand to play with versus an untested asset. On the other hand a litigated patent also comes with its own baggage of previous constructions and royalty basis.

    Additionally, especially with the recent volatility related to software and CBM patents – the legal climate is another key analysis that must be integrally included in any portfolio monetization campaign.

  • [Avatar for American Cowboy]
    American Cowboy
    September 8, 2017 10:22 am

    I you don’t use the patented technology yourself and seek licensees, be prepared to be called a patent troll.