Obtaining and maintaining dead weight patents doom a patent portfolio to failure

By Gene Quinn
March 2, 2016

failUnfortunately, the issuance of a patent simply does not guarantee that the underlying innovation is of any kind of foundational importance, or that the patent and claims are written in ways that suggest the patented innovation is valuable. Sure, patents are statutorily presumed to be valid, but the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO) does not presume patents to be valid during post grant proceedings, so if you have a commercially viable patent that is being infringed you simply cannot assume it will be presumed to be valid despite what the statute says.

For the time being at least this means that patent owners must go farther than ever before to ensure that the rights they are obtaining are going to be able to stand up to challenge, both challenges in the federal district court that afford the patent owner property right protections (and where patents will be presumed valid) and challenges at the PTAB that are one-sided against the patent owner and considered to be fundamentally unfair by many (and where patents will not be presumed to be valid).

Anyone who reads press releases or financial news can attest to the fact that companies, both big and small, repeatedly talk of developing a patent strategy for the twenty-first century that will enable them to compete in the global market place and take advantage of existing synergies and ongoing alliances in a manner that will create shareholder value and bring new technologies to market.

What does that even mean? Truthfully, this seems to be code for “we don’t really have a clue but want to make it sound like we know what we are doing.” This kind of PR patent strategy, which does not seem to appreciate the divergent treatment patents will face depending upon the venue of use, is doomed to fail.

Perhaps patents as a PR strategy is the best many companies can do because the very nature of preparing a patent strategy is something that requires both understanding of the patent laws, a healthy understanding of the business realities of evolving technologies and a sophisticated understanding of the core technology at issue and available business opportunities. In order to plot a course calculated to succeed company leaders need to be cognizant of the actual business realities facing the company, not the talking points of lobbyists or those who write SEC filings or those who get paid to write press releases.  Indeed, a comprehensive understanding of your own research and development, as well as where the industry is heading and what market opportunities are available today and will likely be available tomorrow and next year and three years from now, is crucial when attempting to create the patent strategy that has any chance of succeeding.

Getting whatever you can sneak by a patent examiner probably never was a wise strategy, although it is true that there was a time in the industry when patents were viewed as a numbers game. Once upon a time the patent business viewed patent acquisition, whether by organic growth or outside purchase, as little more than the corporate version of global thermonuclear war. If you want to succeed, the thinking went, you needed to have more warheads than your enemies. The same was true in the patent world. If you wanted to succeed in the rough and tumble high-tech world you needed to have a bigger patent portfolio than your competitors. At times – many times – the quality of those patent assets were at best secondary if not completely irrelevant.

It is a bit of an exaggeration to say that the size of your patent portfolio is completely irrelevant, but today it is worse than useless to have a portfolio full of patents that are low quality. Not only is there a growing cost associated with obtaining patents in the first place, but there is also a growing cost of keeping patents alive. The seldom told story in the popular press is that many patents do not enjoy the full patent term they are otherwise capable of having because to enjoy the full patent term three separate and increasing maintenance fee payments must be made to keep the patent alive for its full term. For example, maintenance fees are due at 3.5, 7.5 and 11.5 years after a patent has issued. For a large entity these fees are $1,600 for the first maintenance fee payment, $3,600 for the second, and $7,400 for the third.

If you are an entity that acquires many hundreds or thousands of patents a year you simply cannot afford the financial burden of keeping low quality assets alive that have no chance of being used either defensively, offensively, or as part of a licensing business model. If you get patent claims that won’t stand the test of time all you are doing is wasting money paying for the issuance of meaningless rights, and then wasting more money to maintain a patent that is nothing more than a dead weight on a patent portfolio. If you are getting and maintaining a patent portfolio full of dead weight patents that have no value or that are likely invalid you are doomed to fail!

This reality, however inconvenient, drives a tangible need for business professionals in high-tech companies to become more knowledgeable about patent law and patent practice than ever before. Without knowing and understanding the rapidly evolving patent landscape it is impossible for proper business decisions to be made, financial resources will be wasted and opportunities missed.

Business professionals, and patent professionals charged with managing outside patent prosecution firms, must become more proactive in order to ensure that a proper foundation for patent rights is being laid and the rights being obtained are not unnecessarily encumbered by careless drafting. It also means that at times hard decisions will need to be made about the continued viability of a patent application, and perhaps filing that next Request for Continued Examination (RCE) doesn’t make a lot of sense. If a patent application is that important you may need to actually file an appeal. Spending good money after bad in a foolish attempt to convince a patent examiner that has made up his or her mind is just as budget reckless as maintaining low quality patents.

Obviously, there are a lot of considerations that go into any prosecution and maintenance strategy, and perhaps stalling and waiting for a better climate is the best strategy, such as in certain software related fields or when dealing with gene patents, for example. No one size fits all strategy can be employed any longer by those who want to achieve good, strong patent rights. This undeniable reality makes it all the more important for a proactive approach by well-informed and knowledgeable business people who continue to have one eye on the prize and another eye on the budget.

The Author

Gene Quinn

Gene Quinn is a patent attorney and the founder and Editor of IPWatchdog.com. He is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene has worked with independent inventors and start-up businesses in a variety of different technology fields, but specializes in software, systems and electronics. is admitted to practice law in New Hampshire, is a Registered Patent Attorney licensed to practice before the United States Patent Office and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 10 Comments comments.

  1. Curious March 2, 2016 2:46 pm

    For example, maintenance fees are due at 3.5, 7.5 and 11.5 years after a patent has issued. For a large entity these fees are $1,600 for the first maintenance fee payment, $3,600 for the second, and $7,400 for the third
    This describes the cost of keeping the patents.

    If you are an entity that acquires many hundreds or thousands of patents a year you simply cannot afford the financial burden of keeping low quality assets alive that have no chance of being used either defensively, offensively, or as part of a licensing business model.
    However, winnowing one’s patent portfolio comes at a considerable cost.

    There is, of course, the attorney time necessary to (i) evaluate the claims (and scope thereof), (ii) evaluate the current state of technology and who may or may be infringing, and (iii) predict where the technology may go in the future. Moreover, this has to done for all the patents (not just the bad ones) because you don’t know (already) what the bad ones are.
    Other costs are making a mistake as to (ii) or (iii) above and realizing that you had extremely valuable technology that didn’t come to fruition until 15 years into the patent term but you let the patent expire 4 years ago. Just one of those mistakes could easily cost the maintenance fees for your entire patent portfolio.
    There is the cost of dealing with shareholders and explaining why your patent portfolio is smaller than they expected.
    There is also the cost savings that you’ve provided your competitors by doing their hard work for them. A well-drafted clearance opinion likely costs more to a competitor than it would cost you in maintenance fees.

    Bad patents, even those that are badly drafted and ill-claimed, can have value. I’ve seen a pro-se inventor make tens of millions off of claim language that I have to hold my nose to read.

    IMHO, the cost of trying to weed out the weak/bad patents is greater than the cost of maintaining. Granted, a client should endeavor to have their attorney provide them with the best claims possible. However, for many clients, having an issued patent with so-so claims is a lot better than having a rejected application with great claims.

  2. Gene Quinn March 2, 2016 8:47 pm

    Curious-

    Thanks for the comment. As with any piece of general advice there are always specifics and circumstances need particular (if not peculiar) attention. I don’t want to take too much of an issue with what you are saying because I’m sure in certain contexts you are correct. It is all a matter of degree and a function of technology, not to mention how obviously bad the patent in question really is.

    I agree that the amount of time that may be necessary to determine what to keep and what to get rid of needs to be factor in. Most of my work is done in in the software area and I can tell you for certain that there are some patents that you can pick up and look at and with very little effort realize that it is a dead weight (i.e., worthless) patent. If your software patents do not have technical disclosure you are sunk. I realize the U.S. does not have a technical effect standard anywhere in the law, but that is certainly the current running through all the decisions on every level. Show me the technology.

    Of course, the fact that the patent might be dead on arrival presently doesn’t mean that the law can’t or won’t change. In the software area is does every 2 to 3 years. Whether it is a new way of looking at patent eligibility, a new way of understanding what it means to have an adequate description, or a new way of understanding obviousness. The law of software changes constantly. So another factor has to be how old is the patent. Of course, you must factor in whether the patent has made any money for anyone other than the patent attorney.

    In the software space, which I know best, there are plenty of patents that are old, haven’t made a dime, have extraordinarily thin specifications and nothing more than method claims. You can tell very quickly that those patents are bad and spending $7,400 for a third maintenance fee just doesn’t make a lot of sense when that money could be better spent on contemporaneous innovation or strategies to prop up patents or applications with better prospects.

    -Gene

  3. Dave Szum March 3, 2016 8:00 am

    I think there is considerable value in what you both are saying. While only a patent agent, I do have over 30 years of R&D and over 15 years of R&D management experience. My observation is that Gene’s points are right on point going forward and adds a possible way, if one is willing to invest the time, to free up patent budget for writing better post grant proof patents. I have been through such post grant proceedings and Gene’s points are dead spot on.

    I have also experienced the effect that Curious brings up; wherein a patent looks useless at first glance but ends up standing through the most rigorous post grant proceeding and protecting the client’s business interest. For me, at least, Gene’s call to vigilance in this rather dynamic point in patent rule and law history AND Curious’s point not be slavish to any one simplified rule of thumb are both very well taken. The winners, going forward (IMHO), will be those who are most mentally nimble to adjust accordingly. Thanks for the thought-provoking write-ups to you both……

  4. Horacio March 3, 2016 10:08 am

    Greetings from Chile
    My country doesn´t have a particular strong IPR market and there is a lot of misconceptions among all the entrepreneurs and business people. A year ago I heard in a corporate conference one fellow saying that US firms fill a lot of provisional patent applications and later they deliberately don´t continue the application process.
    He explained that companies get the provisional application only to block the technology for one year, knowing they won´t apply and putting them on the public domain.
    I explained such strategy has an significant cost (using the same arguments as yours in this blog) and probably a boomerang effect as well, but he insisted in his point. What are you thoughts?

  5. Curious March 3, 2016 11:09 am

    You can tell very quickly that those patents are bad and spending $7,400 for a third maintenance fee just doesn’t make a lot of sense when that money could be better spent on contemporaneous innovation or strategies to prop up patents or applications with better prospects.
    I’m not going to disagree with you on just about any of your points. However, what I can is that I would rather pay the $7,400 on hundred patents because the economics shifts the other way if just 1 out of those 100 turns into a multi-million blockbuster that you never saw coming.

    Can you think of how the client would react if you, as outside counsel, recommended abandoning that 1 patent. I feel quite comfortable telling a client that I don’t think a particular claim will be hard to fringe (and/or easy to design around). However, I cannot know, with any precision, whether anybody is currently practicing the invention (or will in the future).

    Most attorneys are considered to be risk adverse, but I believe I’m not as risk adverse as most. However, this is one instance in which I would rather be very safe than sorry.

  6. Dr Steve Postle March 3, 2016 11:31 am

    Gene – nice article! It would be instructive to plot (and publish) the performance of those granted patents to date, that have been at the mercy of the PATB under PGR or IPR proceedings, versus the variable parameters in a tool like Innography’s Gem Finder utility (and there are others). Might give additional insight into what factors really curry favor with the PATB (albeit that might be a moving target), and thus how better to draft in the future as well as cull in the present.

  7. Anon March 4, 2016 6:35 am

    Curious,

    There is always risk in cutting what may turn out to be a “golden egg.”

    But that type of risk can also be applied to other “what-if’s” along other lines:
    What if this project turns around?
    What if sales for that item turn around?
    What if that manufacturing plant has tomorrow’s capacity that we need if…?

    $7,400 on a set of 100 patents at the eleven and a half year mark brings a price tag of nearly three quarters of a million dollars for “what-if’s” that – if managed properly have more than a decade of track record with which to measure the probabilities of risk/reward.

    No other “what-if” will have that type of informing background.

    Assets should not be neglected in the first place (which I think is an underlying assumption in your “don’t spend for upkeep” view), and certainly should not unduly impact business decisions that include (every day) the mere possibility of reducing tomorrow’s big “What If.”

  8. Concerned March 4, 2016 8:00 am

    Gene, thank you for a terrific article about this particular segment of IP strategy. I, like many other IP professionals, land on the side of Quality in the Quality vs. Quantity argument. The thing I wonder is if more companies actually adopt the Quality strategy (i.e., filing only quality patents patents and less patents overall) will we see new patent filings be reduced and patent abandonment rates increase? Does this then lead to the USPTO (and other patent offices around the world) with less income and could it lead to a budget deficit? Now when a business runs a deficit it needs to reduce costs or raise the price of its product or service in order to get back to being a profitable enterprise. So the question I have for you is “can the USPTO stay ahead of this curve and not produce a lower quality product in the event income to the USPTO is reduced as described?”

  9. Gene Quinn March 4, 2016 10:20 am

    Concerned-

    Excellent questions. Very interesting you should raise these. I’ve been talking to people about this very thing. I have on my desk at the moment, and for a week or so, notes of conversations I’ve had. Trying to figure out how to write it up. The recent EPO article has started to crystallize my thinking since they are seeing increases in filings.

    The USPTO is seeing a decrease in filings and less is being maintained. They are not going to hit their budget targets in FY 2016. I think we will continue to see fewer applications, although not a dramatic drop at any one time probably, but a lot fewer maintenance fees – particularly those expensive third payments. This is going to create real pressure on the USPTO budget given they are increasingly asked to do more, do it more quickly and without giving due process (i.e., PTAB) and innovation is just getting more complicated. Factor in the decisions requiring ever more disclosure and it is easy to predict a looming nightmare for the USPTO. A self inflicted wound created by the confluence of the Courts, Congress, the PTAB and recalcitrant examiners who are not following the law or what they are being instructed to do by senior leaders.

    Stay tuned. More to come.

  10. Begging the Questions March 10, 2016 10:02 am

    @concerned –

    Well, if this were a business, what you describe is the death spiral. Profits are down…..decrease costs/service…..lose more customers……..profits down…decrease costs/service….etc.

    If the USPTO is intended to run as a profit center, then it would seem to be doomed in the face of ever increasing restrictions on patents (post grant proceedings, more severe 101 restrictions, etc). But I guess I want to ask the question….do we really expect the USPTO to be a profit center or a regulatory body? It seems as if it is becoming the latter. If so, it seems there would be lots of negative implications for US based businesses on an international scale. On the other hand, I have heard it said that modern companies (Google, for example) do not rely on patents at all but rather on innovation pace and secret protection. They seem to be doing well.

    So, perhaps, the ultimate question is: are patents becoming obsolete? Of course, we may want to live in (I expect) vehement denial since we are IP professionals, but as a person with a business background, I am asking that question myself. Lots of costs in filing patents (less so in fees, more so in our payroll costs).

    Looks like you struck a nerve here Gene! Provocation nicely done! I will for certain stay tuned!