The process of securing allowances of patents usually takes three, four or even five years from the priority filing date, depending on subject matter and the jurisdiction where the patents were prosecuted. A great deal can change in a patent applicant’s circumstances over these extended time periods. Patent applications with great potential value at the time of filing may lose their corporate and/or commercial relevance over time. This article considers patent lifecycle management from the perspectives of institutions, start-up companies and large corporations.
Most patent applications filed by institutions and start-up companies are exploitative - that is, intended to capture and protect commercial monopolies for an invention’s compositions and/or use and/or related methods. Institutional goals in filing patent applications include attracting licensing interests from commercial entities or securing IP assets that can be spun-out into a new start-up company. Start-up and early-stage companies file patent applications that can be used as collateral for securing capital investments and/or research funding; and/or to provide for exit strategies, which may include one or more of joint venture agreements and mergers or acquisitions by larger, better-funded companies. Large corporations tend to file patent applications for defensive reasons as well as exploitive considerations, securing freedom-to-operate and ensuring commercially valuable intellectual property for cross-licensing in cases where they might not have freedom to operate.
Formal IP audits are usually conducted as a result of a triggering event. For institutions, a typical triggering event might be an expression of interest from a company seeking to license in one or more patent applications. Licensing candidates typically conduct IP audits to assess the scope and quality of protection provided by filed patent applications and to identify related commercial opportunities. For start-ups and small companies, IP audits are requisite components of the due diligence conducted by potential investors or business partners. For a large corporation, an IP audit trigger may relate to a licensing-in opportunity or to an IP portfolio acquisition opportunity. A large corporation would be responsible for conducting or managing an IP audit of a third party’s IP portfolio or an individual patent family. In cases where a large corporation is the target of a merger or acquisition, or alternatively is seeking significant financing, its IP portfolio will be scrutinised by one or more third parties. In all of these cases IP audits can be hectic and chaotic. They are often complicated by paucities of essential documents and records, the result of poor practices in documentation and document storage over the time the intellectual propety was developed and protection sought by patent filings and prosecution.
A good business management practice for patent applicants, regardless of whether they are institutions, start-up or small companies, or large corporations, is to conduct and summarise internal IP audits on a regular basis (eg, annually). Internal IP audits should have at least four categories of “checklist” questions, including:
- Prosecution status.
- Assessment of commercial opportunity and potential value.
- Commercialisation status.
Internal IP audit summaries should be kept as hard copies in “IP due diligence” binders and also as electronic files in secure directories. This approach provides management with the means to track and confirm that key administrative documents such as invention disclosures, assignments, disclosure agreements, material transfer agreements and licences have been properly executed, recorded, stored and catalogued. Regular internal audits also help to ensure that time-critical events such as patent filing deadlines, patent office response deadlines and fee payment deadlines are addressed in a timely manner, and that pending and issued patents are in good standing in all jurisdictions in which they have been filed.
For both institutions and corporate entities, favourable third-party IP due diligence reviews can be facilitated by regularly scheduled internal IP audits to update:
- The target market relevance and conditions with respect to the intellectual property's potential value.
- Progress made toward commercialisation.
Furthermore, information generated by these audits will facilitate management’s decision-making on commercialisation strategies, licensing strategies and early identification of new opportunities to develop or acquire, or alternatively, divest selected components of IP portfolios.
This article first appeared in IAM magazine. For further information please visit www.iam-magazine.com.