Patent stockpiling and suits are unprofitable---they’re only used to enhance innovation.

Kevin McLintock; "In Defense of Patents: Retaining value and relevance of patents in periods of rapid innovation"; IPWatchdog; 9-7-2016; https://www.ipwatchdog.com/2016/09/07/defense-patents-periods-rapid-innovation/id=72667/

Innovation, whether in the technical or biological fields, occurs at a pace today that likely exceeds any period in history. This is due in part to the modern tools available that promote innovation. Equipment that was once available only to universities or billion dollar corporations, now sits on the desks of small startup companies and hobbyists. Consider: only a few years ago it cost tens of thousands of dollars and took months of work to produce a medical prosthetic limb. Today, researchers are using consumer grade 3D printers to create replacement jaw-bones in a matter of weeks. In an environment of such rapid innovation, it is no wonder that some question whether patents are still valuable or relevant given the slow, bureaucratic and expensive process require to obtain them.

This negative assessment rings somewhat true when patents are viewed as pawns in a patent arms race, or thought of as assets that take years to issue and then sit on a shelf only for use in lawsuits. Such patent strategies generally focus on harvesting all available inventions up-front in the hope that the resulting patents will develop some form of value in the future. In reality, only a small minority of very large companies can truly afford to engage in this “file and forget” approach. Further, as observed in the smartphone patent wars, huge patent portfolios developed in this way typically yield only a small number of enforceable patents, and the associated patent litigation rarely produces a clear winner. But many smaller companies and independent inventors also follow this same front-loaded approach, spending limited dollars to file as many patent applications as they can, in as many countries as they can afford, in the hope that the resulting patent(s) will have value in the future. When viewed through such a lens, and considering that a number of today’s inventions will be obsolete within three to five years, it seems reasonable to question the value of patents.

The value of patents in our modern age, however, does not turn on poor, outdated strategies that are only mildly effective for the largest and richest patent applicants. The true value of a patent has always depended on what that patent ultimately achieves for the owner. Therefore, to assess the modern value of patents, one must determine the specific benefits desired from a patent, and whether those benefits can be effectively realized within a relevant timeframe using the available options.

Many associate the value of a patent with possessing enforceable rights. In most countries, a utility patent generally takes three to four years from filing to issuance. In a fast moving technology field, this timeframe may exceed the useful life of the invention. Does this then negate the value of filing the patent? It may, if the intended benefit of the patent is solely tied to litigation or licensing. However, patents and patent applications obviously have a number of tangible and intangible benefits beyond enforcement.

One benefit that filing a patent application may bring is enhanced marketing. Published patent applications often get picked up by trade publications and can be interpreted as an indication that a company is pioneering a new technology, or entering an unanticipated new field (whether correct or not).

Other benefits of a patent at any stage of prosecution include support for funding efforts, establishing first-mover claims, strengthening freedom to operate positions, or illustrating a robust IP position underpinning a business. Most venture capitalists and angel Investors continue to evaluate IP portfolios and use them as impartial metrics in valuation and investment decisions. Other, less tangible potential benefits should be considered as well, such as creating perceived barriers to entry, which can limit competition or negatively influence the funding of competitors. If the intended benefit of a patent relates to one of these categories, it is irrelevant how long it takes for a typical utility patent to issue. A patent or patent application can easily be curated to meet these or other goals.

If having enforceable patent rights in less than three to four years is a priority, there are a number of options available to achieve this. In the US, accelerated patent prosecution is available via the Track 1 system. For roughly double the upfront cost, many applicants receive issued utility patents via Track 1 within one year of filing. Other patent options should also be considered when enforceable rights are desired in as little as one year. Design patents are an attractive means for protecting physical devices, and typically issue one to two years from filing. In recent US litigation, the scope of design patents has been interpreted relatively broadly, and the penalty for infringement can be an entire disgorgement of the infringer’s profits. This is potentially much higher than the typical reasonable royalty associated with infringing a utility patent. Looking outside of the US, countries such as China, Japan, South Korea, and Germany offer utility model patents (also sometimes known as “registrations”), which generally issue within a year. While not considered as robust as regular utility patents, utility model patents can be very effective when used against copycat type inventions. The popularity of utility model patents in China has skyrocketed, due to their low cost, quick issuance, and perceived value. In fact, the number of annual utility model patent applications in China now exceeds that of regular utility (Invention) patent applications. By considering accelerated prosecution options, diversifying the types of patents in a portfolio, and looking at foreign options, enforceable patent rights are certainly attainable within a practical timeframe for even fast moving technical fields.

Monetization is also a reasonable strategy for extracting value from patents. If contemplated during the IP generation stage, decisions can be made to maximize potential returns. This may include blanketing a technology field, as employed by some computer memory and haptic feedback companies, or targeted filings on critical innovations within a field. Opportunistic monetization may also be considered after a patent is filed. This may include royalty bearing licensing, cross-licensing to reduce outgoing royalty payments, or divestment. While divestment can be attractive, patents are routinely over-valued when making divestment decisions, and many potential pitfalls are not given sufficient consideration. A common misconception is that patents can be divested quickly. In reality, the process of analyzing a portfolio, working with a broker, marketing, vetting potential buyers, and closing a deal can take a very long time. Timeframes of six months to a year are not uncommon to divest patents, assuming that there is interest in the market.