What were you thinking? Patent abandon rates rising

 

Patent abandonment rates spiked in 2014.  More than 425,000 were abandoned over the past five years.

Why were there so many patents abandoned last year and now, 2015 is on track to see 106,000 patents lapse?  We can only speculate while we do some client research to uncover their rationale, but I believe that all of the recent legislative changes, the Alice ruling, new PTAB procedures may have had the largest impact.  The USPTO has very good statistics – updated here to give a breakdown on those proceedings.

US Patent abandon rates

Total US Abandons by Renewal date by year since 2009

 

Looking at the distribution across the three renewal dates we see a pretty even distribution.  Why would you not renew at the first renewal?  You or your firm just spent upwards of $20,000 to receive the issued patent and the fee is at maximum $1,600 (for larger firms).  Did further analysis reveal serious flaws in the patent?  Did the market shift in the years since you first filed that patent? Or, did you/your firm simply lose interest?

Were licensing departments forced to abandon because of value impairment calculations.  Yesterday, Document Security Systems (NYSE: DSS) revealed in their earnings announcement they took a $37 million write down on some of their patent assets:

“…faced significant headwinds in its technology management business due to changes in US patent law that resulted in adverse rulings and ultimately significant impairments to our assets.” said Jeff Ronaldi, CEO of Document Security Systems. “In Q4, we recorded significant impairments following an adverse ruling in our Bascom Research case against Facebook and LinkedIn, which was delivered on January 5, 2015.”

Ok, so maybe not much love lost or tears for a DSS but this is from a company with a market cap of under $20 million.  What if your company has a Billion dollars worth of patent and IP value on its books? Did you do any analysis to determine the value of the patents you decided to let go?  Our hunch is no or not very much – at least not yet.

We did a little more digging to determine who were the highest volume “abandon-ers”.  No surprise that for the most part the highest filers where also the highest to also not renew.  The eminent question is how many of these patents should have never been filed for in the first place?

topabandoninglast5year

If you have dozens to hundreds of patents to assess every single week do you have the resources or processes to properly assess their long term value to your firm?  More importantly, do have a mechanism to determine if there is interest in your patent assets in the open market?

At our IP commercialization firm, idealAsset, we help the largest patent holders quickly assess their portfolios at or near renewal time with a market facing assessment.  We have an automated way to offer the patents to a highly targeted global audience of credentialed buyers.  If you could easily/efficiently find a buyer or licensee for a patent you scheduled for abandonment – wouldn’t that be a much better outcome for both parties?

What we find many times is a licensee is energized to acquire your unwanted patents because they can be had for less than filing one’s own patents – by eliminating the latency/risk of prosecution, et al.  Further, establishing a net new relationship among firms may lead to more synergies elsewhere.

It boils down to opportunity cost.  A F500 firm has an opportunity cost model that is exponentially higher than a small or medium sized business.  Abandoning a patent at renewal not only saves the fee but eliminates the licensing or sales costs too.  Throwing patents away is the cheapest option.

What if you had an inexpensive means to at least pulse the market and their interest before your patents hit the round file? What if the buyer or licensee paid for the patent, paid the fee and offered you a grant back – at least until the next renewal (or through expiry if at the final renewal).  Isn’t that a win/win/win?

So, how would you say your firm is doing on assessing your overall portfolio at renewal time?  Do you think you have a reliable process and series of tools to properly assess which ones to keep and which ones to set free?

 

Tom Hochstatter, Managing Editor

Props to AcclaimIP for pulling together some seriously cool data for us to study.

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