Patent portfolio pruning (or tuning) to increase IP investment returns

Alexander Butler and Daniela Hoyos of Questel look at how leading companies utilise a combination of analytics, expansive thinking of possible outcomes and improved decision-making processes to improve their return on invested capital for their patent portfolios, and – sometimes – broader portions of their intangible asset inventory.

Download this article to learn about:

  • The positive returns, in both actual savings and potential revenue, that results from a well-designed portfolio pruning exercise
  • How portfolio pruning can both clear dead weight and bring cash and other returns on past R&D and patent investments
  • The value in fully investing in the exercise and not allow emotion-based decisions to factor into the process

 

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“IP executives frequently make two statements that require consideration by broader corporate management teams considering their IP return on invested capital:

  • “Intangible assets (particularly, patents in technology firms) reflect approximately 80% of market valuation”; and
  • “Small portions of a firm’s intangible assets are truly valuable to the firm (particularly patents, with common analysis citing less than 2% to 5%)”.

These statements invite the question: are corporate intangible asset inventories so vast that more than 95% spoilage is immaterial and acceptable?

More importantly, how can companies employ efficient, data-driven processes to create meaningful savings and returns from what is not valuable to their organisation?

This chapter describes how leading companies utilise a combination of analytics, expansive thinking of possible outcomes and improved decision-making processes to improve their return on invested capital for their patent portfolios, and – sometimes – broader portions of their intangible asset inventory.

Investments and carrying costs
Patents and other intangible assets are expensive to create. Technology-centric companies routinely invest 8% to 12% of gross revenues in R&D. For a theoretical company earning $1 billion in annual sales, this equates to approximately $100 million in R&D investment.

The following analysis translates investment into innovation and the resulting IP assets via a common metric and benchmark: patents to R&D. While inherently imprecise, this form of analysis illustrates that leading technology firms typically seek protection for approximately one patent family per year per $1 million in R&D. Excluding the time cost (which likely dwarfs the monetary cost), the average cost to obtain a single patent family with geographic coverage in the United States, the European Union and Japan is approximately $100,000.”

 

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