In the past few decades, intangible assets have come to constitute the major portion of a company’s value or brand. It is obvious that for the biggest enterprises in the world, such as Apple, Alphabet, Microsoft, Amazon and Meta, intangible assets are now the key elements that account for the true value of these world's biggest corporate giants.
Among the various kinds of intangible assets, patents are identifiable assets with rapidly growing potential and significance. In the past, a company’s IP department was usually considered as a non-profitable unit, draining resources of the company just to apply for and maintain patent rights, but this would not be the case if the patents were used properly and efficiently. Therefore, how to appraise and maximize the value of a patent, and even monetize the patent, has become an important concern for many companies.
When appraising the value of a patent, it is crucial to ask why an applicant applied for a particular patent in the first place. According to Article 58, Paragraph 1 of the Taiwan Patent Act (“the Act”), “Unless otherwise provided for in this Act, the patentee of an invention patent has an exclusive right to prevent others from exploiting the invention without the patentee’s consent.” In addition, according to Article 96, Paragraphs 1 and 2 of the Act, “A patentee of an invention patent may demand a person who infringes or is likely to infringe the patent right to stop or prevent such infringement. In case an infringement of invention patent occurs due to intentional act or negligence, the patentee may claim for damages suffered therefrom.”
Based on these provisions, we can conclude that the fundamental purpose of applying for a patent is to protect an invention (including utility model and design) from actual or potential infringement. Once infringement occurs due to an intentional act or negligence, the patentee may claim for at least the damages suffered from such infringement. Traditionally, the prevention, protection and compensation aspects of a patent mainly provide the patent holder with defensive measures. However, it is worth to note that in recent years, these aspects have also opened doors for the patent holder to the potential of an offensive way of ultilizing patents, such as actively initiating litigation against a patent infringer, or even creating a patent pool collecting as many relevant patents as possible in order to deter potential competitors and in turn generate revenue.
Further, according to Article 62, Paragraph 1 of the Act, “The assigning, entrusting, licensing, or establishing of a pledge on a patent right by the patentee shall have no locus standi against any third party unless it is recorded with the Specific Patent Agency.” It can be inferred from this article that a patent holder can freely negotiate with any third party who wishes to take advantage of the to-be assigned, entrusted, licensed, or pledged patent right, thereby further generating profits. In particular, the assignment and licensing of patent rights are among the most frequent and important commercial practices.
By assigning or licensing a patent, the patent would no longer be merely a stationary shield against infringement, but it can finally generate earnings and also be used as leverage in commercial transactions. For example, a licensee normally must pay the patent holder a fee (known as a royalty) in order to be permitted by the patentee to carry out an invention. The amount of royalties could be enormous when the patent is crucial, or when the intended uses involve several indispensable patent rights. Therefore, a patentee should always be aware of this way to fully exploit the value of a patent.
In addition, a patent may also have the potential to reduce expenditure. For example, a patentee might consider the option to cross-license a patent with other patentees, so that the patent holders can share and benefit from one another’s patent rights without having to pay royalties to one another to cut down each patentee’s expenses.
Bearing all these approaches in mind, it is possible to transform a company’s IP department from being only an expense into a financially productive unit, which may be achieved by utilizing patent rights as a source of earnings, strengthening the protection web or reducing costs in any form.
Depending on their strategies, companies may also consider buying patents to strengthen their patent portfolio, and enforcing their purchased patents and their increasingly broadening patent portfolio in a proactive fashion to find and prosecute patent infringers. On the other hand, even if they are not actively monetized, the purchased patents in an extensive patent portfolio may simply serve to protect the company from being accused of patent infringement. Both of the above are common approaches for many large companies in the manufacturing or tech industry.
As a practical measure, it is beneficial to create a patent portfolio by collecting relevant patents of the same field. Due to each industry’s large scope, only having a few specific patents may not be enough to cover all possible claims. Therefore, having an expansive portfolio is important not only for the prevention of possible infringement, but also as a strong weapon against potential competitors. As mentioned earlier, patent assignment is another way of generating earnings. Therefore, having a strong patent portfolio can also become a huge advantage when a company decides to sell its patents. Since, as mentioned earlier, the purchased patents and comprehensive patent portfolio can also be used for cross-licensing with other companies, a larger patent pool can further provide multiple options to cut down costs, while minimizing the risks of infringing other companies’ patent rights.
It should be clear now that appraising the value of a patent is an important factor. In order to guarantee the most accurate and comprehensive appraisal, the patent holder as well as the prospective buyer will want to conduct due diligence of a patent, namely establish its assets and liabilities and evaluate its commercial potential. Proper due diligence of patents should include an understanding of not only the claims and the ownership, but also the quality of the patents (through platforms such as Innography, AcclaimIP), the cost of maintenance fee, and whether the patents are currently subject to any litigation, pledge, assignment or licensing. Following these steps of analyzing a patent, companies can get a more accurate picture of the value of a patent or patent portfolio. As a result of such due diligence, a company (either a patent holder or potential buyer) may be able to make informed decisions about which patents should be acquired to supplement and strengthen the patent portfolio, and also identify opportunities to save costs on irrelevant patents that no longer need to be maintained.
It is an inevitable trend that IP portfolios will play an increasingly important role when an international enterprise establishes and expands its business activities. Hence, detailed knowledge about how to appraise and monetize a patent is a key factor to establishing a company’s competitive advantage. To this end, when formulating a company’s IP and business strategy, it is sensible and practical to involve IP attorneys. While companies might shy away from attorneys due to budget consideration, they often end up seeing long-term benefits after obtaining attorney advice. Professional attorneys have valuable experience, know how to be cost-efficient, are aware of time constraints, and can devise a comprehensive plan to maximize the value of a patent.
*Patent Attorney, Section Chief of International Patent Division at Tai E International Patent & Law Office
