Strategic Patenting Decisions and their Influence on Firm Patent Valuation
In 2005 I did a thesis-option for my Masters in the area of IP Strategy. I was going to submit it for publication back then, but graduation + the general busyness of life happened and it was put on the “probably will not get done” list. However, my research was driven in part by business reasons -I really wanted to understand patenting differences between large & small firms – and more importantly how can a small firm with relatively smaller resources get “more for their money” by having more valuable patents. Those in the patent field realize that small firms have less experience than large firms, as measured by filed applications – but I wondered was it by enough to statistically compare the two groups?
The ultimate driver was to help small and medium size firms, as well as smaller groups in a large multi-national, approach IP from a strategic view and generate a higher volume of “valuable” patents. There will be a volume of discussion on what “value” is defined at but for the purposes of this paper I used citations as a proxy for value. While the dataset is quite old and could be updated to see if the conclusion changes, I suggest the general trends are probably still valid.
A PDF of the paper is available here, and the abstract and some take-away points are listed below.
The economic rents associated with patent portfolios are highly skewed with only a small portion having value. This leads researchers and industry to ask what early strategic patenting decisions around the patent itself will impact the future value of the patent, specifically within the context of small firms. To address this question the paper modeled these ex-ante strategic patenting decisions by using a common measurement of forward citations as a proxy for patent value. Six indicators were modeled with two of them, provisional basis and priority claim, not explicitly investigated in previous research.
A focus on the small firm as well as the two strategic patent decision indicators provisional basis and priority claim are areas that have not been explicitly investigated in previous research.
A stronger relationship was found for small firms with indicators of breadth and priority claims, as compared to a weaker relationship of only claim counts for large firms. Research also indicated that from a small firm management perspective the most potential valuable patent is one that covers a broad scope of technology is a new filing and does not claim priority to other applications.
Take Away Points (or what Academia confirms with reality):
How can I apply this to my firm? Small firms can benefit from this research by seeking to increase the value of their future patent portfolio by filing new patents that do not claim priority to other applications, yet cover a broad scope of technology.
How should I change my filing strategy? Dont’ just churn them out. Simply having a patenting strategy that is focused on creating large patent portfolio counts, or having a standard procedure to patent all innovations across a pre-defined batch of jurisdictions will not necessarily lead to a portfolio with a high volume of valuable patents. They must consider each new innovation separately and make filing decisions accordingly and not based on pre-determined business decision procedures.
Can small firms really make a difference by patenting things? Does their lack of patenting experience matter? Although small firms have less patenting experience than large firms as seen by their experience distribution plots, surprisingly the firms patenting experience was not a significant predictor in the model. This suggests to industry that small firms with little or no patenting experience still have potential to create valuable patent portfolios from inception.