IP and Business: Patent Information: Buried Treasure

Planning a merger or acquisition? Looking for creative minds to lead the way in research and development (R&D)? Need to identify the state-of-the-art in a technological area to launch a new product? Look no further. Patent information, the largest repository of technical information in the world, has the answer to these and more.

Patent information is the sum total of all the information contained in every patent document ever published. To date this means some 42 million patent documents worldwide in every technical field, with about one million more documents added each year. As well as patents for inventions, it includes inventors’ certificates, utility certificates and utility models. A veritable treasure trove, patent information is the largest, most up-to-date and well-classified collection of technical documentation on new technologies. 

Outside the patent office, patent information was once largely the preserve of patent agents or attorneys, skilled in conducting searches as the first step in filing patent applications or preparing for patent litigation. But in the last decade, the development of computerized databases of patent information, many of them online and free-of-charge, has opened the doors to users across the board. Businessmen, economists, researchers and policymakers the world over are waking up to the potential value of patent information.

Patent information has become a strategic business tool. It is being used to forecast the direction of technical change, or to assess a company’s relative technological strength in a marketplace. Analyzing trends revealed by patent information helps to identify potentially profitable areas for R&D, key technologies and market opportunities. Studying technical information may help to predict the success or failure of a new product under development and, consequently, the success or failure of the company itself. 

The patent system is based on a two-way deal. In exchange for an exclusive, time-limited, legal right to prevent others from making, using, offering for sale, selling or importing a patented invention without the patent owner’s permission, the owner is legally required to disclose the invention to the public. Disclosure serves the wider public good, by enabling others to understand the new solutions or technology underpinning each invention, thus in turn fueling further technological advances. Each patent applicant, therefore, is obliged to provide a detailed description of the claimed invention in the application. 

Patent applications are similarly structured worldwide. They consist of a front page, a specification, claims, drawings (if necessary) and an abstract. A patent application may be anything from a few pages to hundreds of pages long, depending on the nature of the specific invention and the technical field.

The front page of a published patent document generally displays bibliographic information, such as the title of the invention, the date of filing, the priority date, the relevant technical field, the name and address of applicant(s) and inventor(s). It also contains an abstract, which gives a brief summary of the invention, and a representative drawing. The bibliographic information is an essential means of identifying, locating and retrieving patent documents. 

The patent specification must describe the claimed invention and the technical information contained in it in enough detail that anyone skilled in the same technical field could reconstruct and practice the invention without putting in further inventive effort. Most countries require that the specification include the title of the invention, the background to the invention, a summary, a brief description of drawings (if necessary) and a detailed description of the invention.

The claims determine the patentability and scope of the claimed invention. In patent litigation, interpreting claims is the first step in determining whether the patent is valid and whether the patent has been infringed. 

In most countries a patent application is published 18 months after it is filed, so there is a time lag between the publication of patent application and the time of invention. Generally, however, patents are granted well before a patented product is introduced in the market. So the publication of a patent application is the earliest moment when the relevant information becomes available to the public. Moreover, the patent document provides much more detailed information about a technology than any other type of scientific or technical publication. And it is estimated that more than 70 percent of the information disclosed in patents is never published anywhere else.¹

Patents do not, of course, cover every kind of inventive activity in every country. Some patentable inventions are either kept as trade secrets or put into the public domain through defensive publication in order to prevent anyone else from obtaining a patent on that invention. Both are valid business strategies. Nor do they diminish the importance of patent documents as a business resource.

Many areas of business can benefit from patent information analysis. Some of the practical applications include:

Input to licensing strategy. Licensing technology – into or out of a company – requires reliable information in order to make the right business decisions. If the technology in question is valuable enough, it will generally be protected by a patent because of the intrinsic difficulty of protecting it as a trade secret. Analyzing patent information will provide pertinent technical and business information about the technology. Before starting licensing negotiations, it is essential to have a good understanding of the target technology itself, and of its value in terms of its strengths and weaknesses. Patent analysis will also reveal the availability of competing technology in the same field.

While preparing to license-in technology, a company should analyze patent information to determine whether:

• the technology in question is protected, or is already in the public domain in the target market due to its non-protection, expiration, non-payment of maintenance fees or invalidation of the patent in a court proceeding;
• the owner of an existing or competing patent could bring an action for infringement;
• the technology is overvalued or undervalued in comparison with other related or alternative technologies.

Similarly, while preparing to license-out technology, analysis of patent information will help a company to determine:

• who could be prospective licensees in the marketplace;
• how much potential licensees might be willing to pay for the technology;
• whether it is a core technology in the business, such that licensing it out might become an obstacle to its further development and use. 

Cross-licensing, an agreement between two companies to license one or more patents to each other, may involve payments if one of the parties is perceived to have a patent portfolio of lesser value than the other. Patent analysis plays a role in comparing the patent portfolios of the two companies in order to decide who should pay whom and how much.

Supporting mergers and acquisitions. If a company wishes to acquire a specific technology along with other complimentary assets through a merger or acquisition, then it should first identify all the companies with relevant patents. An initial patent search can identify these. Further patent analysis will help to narrow down the choices and to decide which company is the best target. Once a target company is identified, patent analysis can also address additional questions such as: Is the target’s technology as good as claimed? Is the company priced fairly? Who are the innovators and will they stay with the merged or acquired company? For example, a large company may acquire a small specialty business as part of a broad strategic plan to fill gaps in its technology base. However, upon completing the acquisition, the company may discover that the R&D capabilities of the small company are reduced, because they were dependent on one key researcher, who did not come along as part of the deal having been transferred to the parent company before the sale was completed. If the large company had done its patent analysis thoroughly prior to the acquisition, they could have identified the researcher in advance and taken appropriate steps to retain him.

Guiding R&D. Before developing a new product or going into a new business, a company should seek an overview of the relevant technology field in order to forecast market needs. Patent information analysis makes it possible to map out the trend of technological change and the life cycle of a technology – growth, development, maturity and decline. It will also identify the competitors’ technological assets, as well as the problems and solutions in the development of a particular technology. Knowing the life cycle of a technology makes it possible to judge the right time to invest in the different aspects of relevant research and development. Patent analysis can also prevent infringement, and thus save huge amounts in litigation fees and payments of compensation for damages. 

Patents are good indicators of R&D output. If one company owns more patents than another, it suggests that the company has a stronger commitment to R&D. However, not all patents are equally valuable. Very few patents are for radical inventions that change the world; most are granted for incremental inventions. A patent that is more frequently cited than others of the same age is regarded as a patent of greater impact or of higher quality. From links between patents revealed by patent citation analysis, it is possible to target the acquisition of strong patents, which results in the enhancement of R&D output.

Human resources. Research² has shown that a small number of prolific inventors drive technological development, whereas most researchers produce only one or two patented innovations. Patent analysis, such as co-inventor brain maps, can reveal the key inventors who are vitally important for the future of the company. Such brain maps can identify star inventors within a company and in other companies, providing a valuable tool for retaining or head-hunting talented individuals. 

A tool for creative thinking. Patent information provides a source of technological information that can be used by researchers and inventors to find new solutions to technical problems. The TRIZ methodology (a Russian acronym for Theory of the Solution of Inventive Problems) was developed specifically on the basis of patent information. TRIZ began with the hypothesis that there are universal principles of invention, which are the basis for creative innovations that advance technology, and that if these principles could be identified and codified, they could be taught to people to create or enhance their inventive capabilities. Large and small companies are using TRIZ to create or improve products and to elaborate R&D strategies for new technology. TRIZ is just one illustration of how patent information has been exploited as a tool for developing problem solving and innovation strategies

There are both qualitative and quantitative methods for searching and analyzing patent information. Qualitative methods show the content of the individual patent documents. Quantitative methods result in statistical processing. Both methods have been made easy by electronic databases, analytical software products and private service providers. A few examples of these can be found in the box below.

Intelligent exploitation of patent information, a unique source of technical, business and legal information, will contribute to the success of any enterprise, large or small. Today’s fast paced development has opened new vistas for smart businesses to use patent information to hone their business strategies in domestic and export markets. The relatively low cost of using patent information makes it a particularly attractive option for small and medium-sized enterprises.