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Many companies with substantial patent portfolios realize licensing returns on their portfolios that are well below those of licensing leaders such as IBM and Lucent, even normalizing for portfolio size. Our detailed review of several clients’ portfolios points to several areas where relatively simple adjustments in patent practices should lead to significant improvements in a three- to five-year time frame. This article reviews these measures, with particular emphasis on patents that are farther from the marketplace, such as those generated by a research or advanced development group. Key areas for improvement include: � Manufacturing and design method patents. � Patents with long and detailed claims. � Identifying and patenting potentially important technological trends. � Patents on innovations in research infrastructure. � Patents and know-how as a basis for strategic alliances. � Patents that are central to a new or evolving standard. METHOD PATENTS Patents that cover manufacturing and design methods are, as a rule, difficult to discover and enforce. Discoverability may require actual physical examination of an asserted infringer’s facilities. This is rarely feasible. An important challenge for inventors and attorneys is to obtain patents that define the method in such a way that its use is discoverable in devices made in accord with it. Where such patents cannot be obtained, serious thought must be given to keeping the method a trade secret. Indeed, even when a patent defines the method in such a way that its use is discoverable in the accused devices, such discovery usually requires significant reverse engineering or tear-down. LONG AND DETAILED CLAIMS There are many inventions that form the basis for a valuable product line but nevertheless do not warrant filing for patent protection. In particular, when the prior art is mature and crowded, or the invention itself is complex, the result is a patent with long and detailed claims. Such patents are relatively easy to write and may not encounter much opposition from an overworked examiner. It is extremely difficult, however, to demonstrate that an infringer has infringed every single element of such complex claims. Indeed, it is rare that a patent owner will even try. A good attorney will try to precede long and detailed claims with more general claims, often only to be rebuffed by the examiner. Upon receiving an office action of this sort, give serious thought to withdrawing the application, thereby saving filing fees and attorney and inventor time. Indeed, even when a claim can be allowed, this type of invention should often be maintained as a trade secret. Or, instead of keeping the invention secret, sometimes simply defensively publishing the invention best serves the interests of the patent owner. TECHNOLOGICAL TRENDS Well-managed R&D organizations attempt to identify potentially important technological trends, and file for a wide range of patents in an early attempt to protect the entire field. However, even when an organization has done a good job at picking winning technologies, and in following this up with good research and advanced technology, some of this leadership position may be eroded or lost when insufficient attention is paid to getting the best possible patents, or where resources are inefficiently invested in getting too many patents. In cases in which research management has an early lead, it may be sufficient to stake out a patent position with a few broad patents, and then co-opt potential competitors by simply publishing the detailed improvements and variations. For these technologies, the challenge is to define the key aspects of the technology in such a way that the first patents provide the needed exclusion. INNOVATIONS IN R&D INFRASTRUCTURE Many research organizations are properly proud of their innovations in what one might call research infrastructure. This includes measurement tools and methods, as well as test and other software. Sometimes, these innovations and inventions are the bases for valuable patents. More often, however, patents in these areas are primarily useful only in adding to the volume of the total patent portfolio, and in enhancing the resumes of the inventors. Serious attention must be paid to the question of whether to patent inventions that are mainly useful to other researchers. Discovery of infringement of such patents ordinarily requires some kind of on-site observation, which is not always possible. Even when infringement can be easily discovered, recoverable royalties or damages will not be significant, nor are such patents of much value in cross-licensing negotiations. STRATEGIC ALLIANCES Important innovations, whether protected by patents or trade secrets, can often be used as bases for strategic alliances. Most modern technologies are too complex to be successfully commercialized without partners with complementary skills and resources. An example is Display Technologies Inc. (DTI), the IBM-Toshiba joint venture that has supplied both partners with flat panel displays for many years. The initial technology development alliance arose when Toshiba, a major consumer electronics supplier and leader in the early stages of TFT/LCD technology, felt it would benefit from a partnership with a company that had a stronger IP portfolio in the computer industry. IBM, for its part, was looking for a partner with strength in high-volume, low-cost manufacturing, as well as leadership in the flat panel display technology. (IBM also brought to the partnership unequaled know-how about the IT marketplace, great strength in semiconductor research, development and manufacturing, and substantial experience in commercializing its large flat plasma display panels.) For inventions and expertise that have this strategic potential, a useful question to ask is whether, even if a patent were granted, the patentee has and will maintain sufficient resources in the area to earn a return through a licensed technology transfer. Our experience suggests that a strong technology organization can often realize higher returns by establishing strategic alliances based on a program of licensing its trade secrets than it can by carrying the full commercialization investment on its own. Two good examples are the commercial success of DTI and the technological accomplishments of the semiconductor development alliance among IBM, Siemens and Toshiba. EVOLVING STANDARDS A difficult but potentially rewarding payoff for a patenting program occurs when one obtains a patent on a new or evolving standard. Such opportunities are rare, and will usually be realized only by organizations that are well prepared. One challenge for management occurs when a researcher’s work is a candidate for a new standard. Standards bodies usually say that they will consider only proposals that are royalty-free. This generally suits the researchers, since their personal and professional interest primarily lies in having their work recognized by peers; future royalties may be of little concern. Nevertheless, most standards bodies will agree to a reasonable, non-discriminatory royalty, and a royalty of even one percent on a major standard can be very profitable. Thus, IP management must take a firm position against giving away a potentially valuable asset. Furthermore, even when the patents that are deemed essential for a standard have to be licensed for a nominal royalty, patents on features and enhancements can nevertheless be licensed for what the traffic will bear. CONCLUSION Applying simple tests such as those described above — addressing specific areas where resources can be conserved, and emphasizing business and licensing opportunities — is a key to developing a more valuable patent portfolio in a relatively short period of time. Emmett J. Murtha is the former director of licensing at IBM and the founder and president of Fairfield Resources International, a licensing and consulting company. He may be contacted by e-mail at [email protected]. Robert A. Myers formerly worked for IBM in R&D Management and Licensing and is currently a senior consultant at Fairfield Resources International and adjunct professor at Columbia University Business School. He can be reached by e-mail at [email protected].

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