Obtaining a patent can be worth the costs involved
Each year, more than 100 patent attorneys gather in Colorado to study changes in the landscape of the intellectual property law. This year, we skied Steamboat in early January, caught some good snow, and reviewed all the highlights of the top federal courts as to how they changed the laws involving patents, trademarks, and copyrights.
A panel discussion was aimed at learning the ways inventors and companies get value for the money they invest in patent legal services. After all, most patent costs are contained in law firm invoices. The patent office fees are minor.
Four case studies offer a good variety of finding values in a patent.
- First, a lone inventor dreamed up a new amusement ride. In three years, the ride took off, with 100 installations. Revenue from the licensed patents created a healthy, positive cash flow. Blue-chip owners, including MGM, Paramount and Elitch Gardens, embraced the ride. So how did the inventor cash in on his patent portfolio? He sold the patents and user vase of licensees for $12 million.
While the primary value to the buyer was cash flow and Blue Chip users, a secondary value was provided by the acquisition of all the patents pertaining to the ride. These patents formed the legal control over the licensees to keep paying the buyer until the expiration of the patents in about 18 years.
Thus the inventor never had to use those patents for enforcement, except to provide a basis for cross-licenses.
- The next case study is a toy company. The toys are available on Amazon.com. A creative genius couldn’t afford a patent or the bill to self-publish his book and puzzle concepts. So a networking effort produced a partnership with a printer. The result is national acclaim. Barnes & Noble awards and new building in downtown Denver. Several of the darndest patents protect the toy concepts, and there has been no need to enter a courtroom for patent infringement.
- So of what value are those patents? A great reputation in a small segment of the toy industry, plus a healthy business combined with the patent inventory, makes for a good acquisition candidate for a bigger fish. The smaller firms have to gamble that the $8,000 or so to obtain a U.S. patent can bring in an extra million when it comes time to sell.
- The ease of copying products turned a lighting manufacturer into a patent street fighter. Any lighting product made a plastic and simple electronics can be knocked off in the Pacific Rim. So if a new product gets national attention, the Chinese imports come in three months later, and many U.S. retailers simply ignore patents until the sheriff serves a summons and complaint. Since patent litigation is dubbed &the sport of kings,& what is the small manufacturer to do?
The answer is to sue the pants off every imitator that crosses the border. This client has learned that polite letters and phone calls are sort of like sending an e-mail to your neighbor asking him not to hold loud parties every night.
Patent infringement is stealing, and it’s rarely an accident. It’s usually a willful act of greed to usurp the profits from someone else’s creation. Since the patent laws and courts are somewhat akin to an Alice In Wonderland adventure, then why not pluck the fruits from America’s artists and inventors?
Enron’s Kenneth Lay resigning with a fortune after leading the herd over a cliff exemplifies a lot of America’s corporate morality standard.
Innovative products need not only a patent inventory but also a partnership with a sue-crazy lawyer. Many law firms offer partial-and full-contingency deals to share the risk and reward of chasing thieves.
- One last, rare example of patent value is the passive inventor who collects royalties from a large company.I can count on one hand individuals who can retire on their patent royalties. However, one man got a claim on a telephone device. Several manufacturers eventually paid a royalty after several lawsuits were filed and quickly settled.
This type of royalty revenue can be created by joint ventures as well. Indeed, opening a monthly check with no overhead has got to be the best situation.
-Rick Martin is the founder and only full partner of Patent Law Offices of Rick Martin, P.C., in Longmont. He can be reached at patentcolorado.com.