Collating Financial Data for Patent licensing research – Nice to have but not too useful for the most part

Many experienced researchers I have met say that there is no substitute for technical analysis and the insights received from analysis of the patent data itself. Financial information such as profitability, revenues and market cap of assignees may be required for undertaking industry analysis, however do you really need such data for corporate licensing research? Lets understand this further in the context of in-licensing and out-licensing.

For in-licensing, in IP research, one of the biggest “cant help” limitations is that many patents are held by private firms globally and most online services fall short and do not provide accurate financial picture of privately held firms. In an in-licensing context, an “interesting patent” held by a Microsoft, IBM or Exxon may not excite you as much as one held by a startup or a small-to-medium sized private company. Further, as a corporate IP counsel, you are well aware who the big players are in your techno-commercial space and information of their market cap, profitability and annual revenues doesn’t really add any unique insight to patent data. Private companies in US are not required to provide their financial information to anyone other than the IRS, in most cases the data isn’t publicly available or only approximations are available. The same is true for most countries.

Financial parameters can perhaps help get an indication of where to focus your in-licensing efforts on, but caveats exist here too. Say if your patent portfolios extended across three technology segments A, B and C. Now out of the three B has maximum current market potential and licensing revenues are highest in B. However if you analyze the market and see that B belongs to a maturing market and the markets verticals in which C is operating is growing fast and in 5 years may overtake B then you would rather focus on acquiring patent in C instead of building an assertion portfolio for B. But it is to be noted that such decisions require market estimations based on industry growth trends and not on historical patent licensing information. In fact in the current example historical patent licensing information may even misguide you to focus on B. Now re-read this example with A as CD technology, B as DVD and C as Blue-Ray and you will realize why industry trends should dictate the focus and not past licensing revenues or assignee financial information.

For out-licensing, in today’s market, successful corporate out-licensing requires assertion licensing strategies that use technical data to demonstrate infringement and financial power (…. _your_ financial information) to backup your intention to enforce. So the bigger task (and the first step) here is clearly identifying the patents that are building up upon your invention. For this an in-depth technical analysis, especially claims and citation analysis is required. Once you have a strong technical case, then business, financial, legal (litigation) and overall environmental conditions about you and the companies behind those patents are to be considered.

So you need to ask yourself – Does the path to successful licensing research lie in financial data or does it lie in the technical analysis of patents? Our opinion here is that patent research for licensing must start with just patent analysis. How you build your search set makes a huge impact. Analysis of forward and backward citations can help identify related technologies around your inventions. Building the right citation sets and analyzing their claims is necessary. Combining classification codes with contextual clusters gives deep insights on how the sub-technologies are spread. Application filing trends can indicate which technologies are rapidly growing and which are maturing. Undertaking keyword analysis of claims can give many deep insights about companies active in the same research area.

Once you locate the patents, most of the “research” part is done!

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *