True Patent Value

Defining Quality in Patents and Patent Portfolios

LARRY M. GOLDSTEIN

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DEDICATION

This book is dedicated to all those people who had a dream, overcame self-doubts, and did their best to make the dream true.

“Had we but world enough, and time, This coyness…were no crime…
[But] though we cannot make our sun stand still, yet we will make him run.”

“Carpe diem, quam minimum credula postero”
“Seize the day, putting as little trust as possible in the future”

“And if not now, when?”

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Summary Table of Contents

Acknowledgements
Preface
Chapter Summaries

 Part I – Fundamental Concepts

Chapter 1: An Introduction to Patents
Chapter 2: Evaluating Patents

 Part II – Examples of Good Patents and Good Patent Portfolios

Chapter 3: Court Cases with Good Patents
Chapter 4: ITC Cases with Good Patents
Chapter 5: Sales of Good Patents
Chapter 6: “Essential” Patents in Pools
Chapter 7: Seminal Patents

 Part III — Summary

Chapter 8 Summary
Afterword
Glossary (Including Acronyms)

 Appendix, Bibliography, and Indexes

Appendix: US 5,133,079
Bibliography
Index of Charts and Tables
Index of Authorities
Index of Names and Subjects

About the Author

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Detailed Table of Contents

Part I — Fundamental Concepts

Chapter 1: An Introduction to Patents

I. Patents — Basic Concepts

II. Patents — Procedures at the Patent Office

Chapter 2: Evaluating Patents

I. The Eye of the Beholder: Who’s Looking?

II. Types of Patent Analysis: Fundamental and Financial

III. Fundamental Analysis

IV. Financial Analysis

V. Technology Inflection Points

Part II — Examples of Good Patents
and Good Patent Portfolios

Chapter 3: Court Cases with Good Patents

I. Introduction to Patent Litigation

II. Cases with Winning Litigation

Chapter 4: ITC Cases with Good Patents

I. Comparison of ITC Proceedings to Court Litigation

II. ITC Cases with Winning Litigation

III. Additional Lessons from the ITC Cases

Chapter 5: Sales of Good Patents

I. Why Do Patents Attract So Much Attention?

II. What Creates Sale Value in Patents?

Chapter 6: “Essential” Patents in Pools

I. What are Patent Pools?

II. A Classic Example of a Patent in a Pool (MPEG-2)

III. Patent Pool Case Studies

Chapter 7: Seminal Patents

I. Significance of Forward Non-Self Citations

II. Three Companies with Seminal Patents

Part III — Summary

Chapter 8: Summary

I: Basic Characteristics of a Good Patent (Questions & Answers 1-6)
II: What Are Valuable Claims? (Questions & Answers 7-23)
III: What is Good Support for Claims? (Questions & Answers 24-29)
IV: What Can Destroy Patent Value? (Questions & Answers 30-31)
V: Evaluating a Portfolio of Patents (Questions & Answers 32-45)
VI: Final Thoughts (Questions & Answers 46-48)

Afterword

Glossary (Including Acronyms)

 Appendix, Bibliography, and Indexes

Appendix: US 5,133,079

Bibliography

Index of Charts and Tables
Index of Authorities
Index of Names and Subjects

About the Author

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PREFACE

“And further, my child, be forewarned: of the making of books there is no end, and much study is a weariness of the flesh”. (Ecclesiastes, 12:12)

Why another book about patents?

I am a patent lawyer, registered to practice before the United States Patent and Trademark Office, with a background in physics and communication technology. For the past few years, I have focused on patent commerce, analyzing thousands of patents for purchase or sale. I have worked on behalf of dozens of clients, and they always ask me the same question:

“How do I know if my patent’s any good?”

In cases involving more than one patent, the question may be asked a little differently, such as: “How do I know if my patent portfolio’s any good?” But in all the years that I have been analyzing patents, no one has ever asked me:

            “How do I know if I have a crummy, lousy, worthless patent?”

Patent owners are hopeful they have something of value. They are averse to considering the possibility they may have junk. But patent “value” is very hard to determine. Patents are not buildings or machinery that can be touched, tested, tweaked, or repaired. Patents are abstract, intangible, and subject to a multitude of invisible conditions and considerations.

I am writing this book to try to help you answer the essential question, “Is my patent any good?”

A secondary question– “How good is my patent?” – is a question of financial or quantitative value. This secondary question is not the main focus of this book, although the many examples we consider here will provide insights about this question as well

Who will find this book useful?

This book is intended for people who want or need to understand patent value. That includes, in particular:

1. Patent Attorneys and Patent Agents: You are writing a patent, and you want guidelines to understand whether this particular patent is good and, more generally, the overall concept of “patent value”. The book is intended to give you a concentration of real cases in which specific actions created (or failed to create) valuable patents.
2. Engineers and Entrepreneurs: You are reviewing an application drafted for you by a patent attorney or patent agent. You want to know before filing if the application would result in a good patent (assuming the patent office allows it), or perhaps you want tips on what you can do to improve the value of the patent. If you are interested in selling or licensing-out the patent, then you will also want to understand the patent’s financial value.
3. Corporate Executives, Members on Boards of Directors, Patent Brokers (and others engaged in patent commerce): You own a patent and you want to do something with it, but you need to understand its value before deciding what to do. This group includes also patent brokers advising such executives or directors.
4. Investment Bankers, Investment Advisors, Equity Analysts, and Corporate Brokers: You or your company does not own patents, but you are analyzing a company’s patents as an equity analyst, as a potential investor in the company, or as a corporate broker, trying to figure out if the patents in question are any good, and how they might impact the value of the company.

If you see yourself in any of these scenarios, then this book is for you. However, depending on who you are, you may wish to read only specific parts of the book, and skip the rest (more on this below).

What does this book cover?

When we ask if a patent is “good”, we are really asking if it has high quality from an objective point of view.  A patent is objectively good if:

1. It has “good claims”, meaning that the claims are well written, and
2. The claims have “good support” in the written description.

To say that a patent is “good” means that the people who wrote the patent did a good job – both the description of the invention and the claims are as good as they can be.

However, to say that a patent is “good” does not mean that the patent is “valuable”.  For a patent to be not just “good” but also “valuable” requires, in addition:

1. There is significant infringement by outside parties of the patent’s claims, and
2. No events have happened, external to the patent, which reduce or destroy the patent’s value. A patent may have been very valuable at one point, but external events can destroy its value.

Preface Chart 1 illustrates these concepts, with four concentric circles.

Preface Chart 1: The Hierarchy of Patent Value

As shown in Preface Chart 1, a “good patent” (meaning a high-quality patent) may or may not be valuable, but high quality is a prerequisite to value.  In other words, if a patent is not high-quality (meaning it is not a good patent), it cannot have value.

The concentric circles represent different concepts:

• The largest circle, “All Patents”, is the world of existing patents, including patents that are both “good” and those that are not good.
• The next circle, “Good Patents”, includes only patents with good descriptions and good claims, meaning that the patents have been written as well as possible for the subject matter.
• The next circle, “Valuable Patents,” includes the “good patents” which are also infringed and whose value has not been destroyed by external events.  Not all “good patents” are also “valuable patents”, but the circles are concentric because only a “good patent” may be a “valuable patent”.  The circle “Valuable Patents” is the focus of this book.  All of the case studies, the lessons learned, and the principles discussed are intended to define patents which are both “good” and “valuable”.  These are the patents with “true value”.
• The smallest circle, “Very Valuable Patents”, includes those “valuable patents” which have passed through full market and financial analyses and have been found to be not just “valuable”, but “very valuable”. This book discusses market and financial analysis, but only in passing.  The purpose of this book rather is to define the patent’s internal quality and value, which form the basis of market and financial analysis.

This book is, in essence, an explanation of the concepts just noted. Discussions include: “What is a good patent claim?”; “What is good support for the claims?”; “What is broad scope of claim coverage?”; “What are external events that destroy patent value?”

In the end, the claims of the patent will determine its value. Giles S. Rich, formerly the Chief Judge of what was then the sole appellate court in the United States for patent decisions of lower federal courts, famously wrote in 1990: “The name of the game is the claim.”

Identification of a “good patent” for inclusion in this book involved a two-step process.

1.  The patent demonstrates some measure of validation by a person or party other than the patent owner.  If there is no such validation, then the patent may or may not be “good” or “valuable”, but it is not a candidate for inclusion in this book.

2.   After identifying validated patents, I selected, based on years of reviewing thousands of patents, a few “good patents” which I felt best illustrate what you need to know about this subject.

What are the measures of validation used to identify “good patents?” I use five measures, which I call “gateways to validation”:

1. Court Victory: The patent won a victory in court, which means that court litigation resulted in a multi-million dollar verdict for the patent’s owner, or a multi-million settlement.
2. ITC Victory: The patent won a victory in an administrative proceeding such as that of the United States International Trade Commission (“ITC”), and the ITC issued an injunction preventing the infringer from importing the infringing product into the United States.
3. Sale: The patent was sold for a substantial amount of money.
4. Essential to a Technical Standard: The patent was accepted as a member of a patent pool with a wide market.
5. Seminal Patent: Patents which by their subject, their priority date, and extremely heavy “forward citations” received, are groundbreaking or “seminal” patents.

These gateways do not, in themselves, determine that a patent is “valuable”, but they do suggest that “value” might be found in this patent. “Value” may be wholly financial, in that money flows to the patent owner in (1) court victory, (3) sale of the patent, or (4) licensing revenue from a patent pool. “Value” might also be not financial primarily, but rather a competitive advantage, such as (2) an injunction against a competitor (issued by the ITC), or (5) a seminal patent (which creates a competitive advantage).

Some patents pass more than one gateway, as for example (1) court victory and (2) injunction, or (1) court victory and (5) seminal. The more gateways passed, the more likely the patent is to be a “good patent”, the more likely it is to have “true value”, and the more likely it is to be “very valuable” as illustrated in Preface Chart 1 above.

Not every patent that passes a gateway is a patent suitable to show what is meant by a “good patent.” I reviewed many candidates that have passed one or more gateways, then selected several well-suited to illustrate the concept of a good patent.

The book is organized into three main parts:

Part 1 – Basic Information About Patents: Introduction to patent concepts (Chapter 1) and basic concepts of patent evaluation (Chapter 2).

Part 2 – Case Histories that Illustrate Good Patents: In-depth analysis of patents, organized by the five gateways cited above:

Victory in court (Chapter 3), Victory at the ITC (Chapter 4), Sale (Chapter 5), Participation in a patent pool for a technical standard (Chapter 6), and “Seminal” or breakthrough patents (Chapter 7). Each of Chapters 3 – 7 is structured in the same way: an introduction to the topic followed by discussion of at least one claim in each of several patents, and concluding with a summarizing section called “Lessons Learned.”

Chapter 7 includes, in addition to reviews of individual patents, discussions of good “patent portfolios”. A patent portfolio is a group of patents owned by one company or other entity. Understanding of what constitutes a “good patent portfolio” is important for everyone interested in patents, and particularly for the last two groups of interested parties listed above – corporate executives, corporate Directors, and patent brokers on the one hand; investment bankers, investment advisors, equity analysts, and corporate brokers, on the other hand.

Part 3 – Conclusion: A summary of lessons learned in Question & Answer format, and a Glossary of acronyms and key terms used in the book. Chapter 8 and the Glossary will be useful to everyone reading this book.

What should you read?

If you have the time and interest to read the entire book, that would be best. However, if you are pressed for time, or if you want to focus on topics of particular interest to you, focus on the material in Preface Table 1 below, and skip the rest.

Preface Table 1: Reading Recommendations

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CHAPTER SUMMARIES

CHAPTER 1: An Introduction to Patents –Click Here.

CHAPTER 2: Evaluating Patents –Click Here.

CHAPTER 3: Court Cases With Good Patents –Click Here.

 CHAPTER 4: ITC Cases with Good Patents -Click Here

 CHAPTER 5: Sales of Patents –Click Here.

 CHAPTER 6: “Essential” Patents –Click Here.

 CHAPTER 7: Seminal Patents –Click Here.

 CHAPTER 8: Summary –Click Here.