Introduction: three corporate models for creating patent value
There are two traditional models by which companies or other entities create patent value:
– Model I: Companies “harvest” patents, which generally means that a company finds existing ideas within a company that are suitable for patent protection.
– Model II: Companies deliberately create patent to support planned R&D. In a process sometimes called “mandated innovation”, a company sets R&D goals, then makes sure that patents are created in parallel with the planned technical innovation.
The difference between the models is that Model I looks for patentable ideas that have been developed by chance (sometimes called “serendipitous innovation”), while Model II specifically attempts to develop patents in parallel with or very shortly after R&D innovation. Despite this difference, both Model I and Model II place the emphasis on R&D, not on patents.
We are now witnessing, primarily in the past decade, a new approach, which I’ll call Model III, in which inventors and innovators create ideas that either precede R&D, or that are not related to any specific R&D effort. If Model I is “harvesting” pre-existing ideas, and Model II is “mandating” patents together with R&D, Model III is “cultivating” patents by planting ideas and reaping patents unrelated to R&D.
Why cultivate patents unrelated to R&D? Some people call this “trolling”, or “monetization”, and yes, it may be used to generate money on the patents, but that is only one possible motivation. A second and very different motivation is to create a valuable portfolio of patents which can be used as the basis of a business – the business may be entirely entrepreneurial, or may be “intrepreneurial”, meaning a new business enterprise launched within an existing corporation. Either by monetization or by business creation, Model III witnesses the creation of valuable patents before creation of a valuable R&D effort.
What it takes for Model III to succeed
What is required for Model III to succeed?
(1) A “good concept” to be developed;
(2) “Good” patents (that is to say, “high-quality” of patents); and
(3) A portfolio of such patents (that is to say, sufficient “quantity” of patents).
The rest of this blog will discuss the “good concept”. I’ll discuss patent quality and patent portfolios in future entries.
AT&T’s Bell Labs was probably the most productive and innovative R&D center in the history of humankind, producing 14 Nobel Prize winners and fundamental breakthroughs in semiconductors, lasers, computer programming, and many other innovations. What was the secret to this success? How did Bell Labs discover the transistor or the C programming language? In fact, the researchers were not looking for technical breakthroughs, or fundamental change of any kind. They were looking instead for “good problems”, which they defined by “discovering the weak points [of a system] that could be improved upon”.
“Good concepts” are the basis of patent value
Today, how can people find “good concepts”, meaning ideas that would support good patents in Model III? A recent article suggests the way. Entitled, “IBM Reveals Its Top Five Innovation Predictions for the Next Five Years”, this article lists “five big innovations that will change our lives in the next five years”. The key things here are not the specific ideas, although they are interesting. Rather, the keys are:
– First, innovations that are “good concepts” for patent cultivation occur within the short to medium term, here up to 5 years. Predictions beyond 5 years are extremely difficult, and the building of value beyond 5 years requires not only patience but a large degree of luck.
– Second, the concept starts with an important innovation, or perhaps it may be called a “wave” or a “market movement”. This is not created by the patent cultivators, but they will ride this wave.
– Third, the innovation creates its own technical problems which must be solved in order to realize the benefits of the innovation. Patents that address and solve these problems are the kind of “good patents” required by Model III.
What are examples of “good problems”. The answer involves a concept called Technology Inflections Points (or “TIPs”), which will be the next entry in this blog.
 “Patent harvesting versus mandated innovation”, Francis Moran & Associates, http://francis-moran.com/marketing-strategy/patent-harvesting-versus-mandated-innovation/ (viewed December 24, 2013).
 The Idea Factory: Bell Labs and the Great Age of American Innovation (Penguin Press, 2012), pp.15, 33.
 Article available at http://venturebeat.com/2013/12/16/ibm-reveals-its-top-five-predictions-for-the-next-five-years/ (viewed on December 24, 2013).
 These five are (1) classes customized for each student; (2) improving the local shopping experience with POS service; (3) using DNA to create customized medicine; (4) digital guardians based on your behavior; and (5) learning cities that keep us informed of relevant events and improve urban management.
Larry M. Goldstein is a U.S. patent attorney, and expert in patent quality, and the author of the recently published book, TRUE PATENT VALUE: Defining Quality in Patents and Patent Portfolios (True Value Press, July 5, 2013). He is the principal patent expert in yazamip, web site www.yazamip.com, which is his second venture into the world of cultivating high-value patent portfolios.