Last week Patent Properties, Inc. (OTCQB: PPRO) came through with the long anticipated public launch of The United States Patent Utility, which the company describes as a big data-driven subscription service that makes the economic benefits of the U.S. patent database available to companies of all sizes. Patent Properties and the Patent Utility are the brainchild of Priceline.com founder Jay Walker, who is one of the world’s celebrated living inventors.
The Patent Utility will serve two basic types of users. First, there are organizations that list their underutilized patents in the Utility’s catalog for the purpose of seeking licenses from non-completive companies. There is no cost to organizations to list patents and there are safeguards in place that would allow patent owners to identify those who they do not wish to license, such as competitors.
The second type of user that the Patent Utility will serve are non-exclusive licensees that will pay a monthly subscription fee to receive a license to a library of patents. The charter membership price is only $1,200 per month, and they are offering a risk-free 30-day trial. The Utility will also provide licensees a comprehensive set of information services, expert assistance and legal fee discounts to help them improve products, see what competitors are working on and reduce their risk of patent infringement.
At the heart of the Patent Utility is an advanced semantic search engine that identifies the technologies that are relevant to any individual business or entity. The analytical processes behind the semantic search engine will capture text-based information about a company both from publicly available sources and the company itself. This information will typically include product specifications, description of core technologies, identification of key competitors, and research and development priorities. The information is then processed and analyzed against the entire active U.S. patent database, which currently stands at 2.3 million patents and millions of pending applications. The process cross-references the company’s products, components, services, materials, methods and processes with specific patents and claims in the U.S. patent database. The more closely the patent claims relate to a company’s information, the more relevant the patent containing those claims is.
One key benefit of the Utility is found in how it will streamline the rights acquisition process when relevant patents are identified. Rather than employing a human legal expert to assess the patent litigation risk and licensing potential, the Utility leans on statistical probabilities to identify those patents that are most likely to either help or hurt a company’s competitive position. By using sophisticated algorithms to search for and identify broad categories of relevant patents the process is both fast and efficient. This allows those seeking peace of mind can obtain bulk licenses to numerous related patents for a fraction of the total cost (i.e., transaction costs + licensing payments) typically associated with licensing a single patent.
The hope of its creators is that the Utility will allow patented technologies that are marginally or modestly valuable to become commercially useful in the right hands. If that occurs it will present a win for the companies or entities acquiring the licenses, but it also provides a win for the patent owners who allow the Utility to act as a non-exclusive licensing agent. In fact, in many scenarios patent owners will now be able to derive some revenue from long underutilized patents in their portfolio.
“It really doesn’t matter what size you are, at the end of the day every company needs to improve products faster and cheaper than competitors and many companies simply don’t have a strategy for doing that,” Walker said when reached via telephone last week. The first and obvious benefit that the Utility will provide is providing licenses to the technologies and innovations that will allow companies to improve their products and services faster and cheaper, but there is more to the Utility. “The patent itself is only an advertisement for a deeper set of asset values,” Walker explained. “All of those benefits accrue to me because I have a service that keeps an eye on the world of innovation in ways that never happened before.”
What are those deeper asset values that Walker is talking about?
“All start-ups are essentially a journey from an initial insight— we’re that way too,” Walker explained. “The more we talked to users the more we learned that users not only wanted access to the technology inside the patent database, but they also wanted access to any way that database could help their services.”
Despite a long history in the United States that requires the “best mode” of an invention to be disclosed at the time of filing, there are a great many trade secrets that are never disclosed in a patent application. Even if a patent applicant chooses to disclose every aspect of the innovation, including all secrets that could otherwise be kept legitimately confidential under U.S. patent laws, there never has been a duty to update a patent application with additional information. In fact, updating patent applications with more information is strictly prohibited.
With the patent process lasting 3, 4, 5 or more years to obtain a patent in the first instance, and a patent lasting for years after it is issued, by the time someone may be interested in licensing a patent there could easily be a decade or more of know-how and trade secret information possessed by the patent owner that has never been disclosed. Thus, knowledge of a disclosed invention is useful, but licensees don’t merely want the patent rights, they want the best information the patent owner possesses, which is why as valuable as a patent is it is only the tip of the iceberg. Therefore, there will be acquiring companies that are interested not only in the patent litigation mitigation aspect, but also keenly interested in identifying potential partners with unique knowledge and technology in a certain area.
“Relying on in-house ideas only isn’t enough to improve products and services at the rate that is necessary to keep up with competitors,” explained Jonathan Ellenthal, CEO of Patent Properties. “There is an insatiable appetite to know what competitors are working on, and everybody wants to figure out how to do these things in a way that limits patent infringement risk.”
According to Ellenthal, there has been a very good response to the launch of the Patent Utility. Initial participants include Microsoft Corporation, Harman International Industries, Goodway Technologies Corporation, Edison Nation, H.H. Brown Shoe Company and AT Cross Company. The initial launch did not disclose any university participants, but Ellenthal told me that some universities would be joining on as listing companies shortly. “Universities are an important part of this puzzle and we have a number of oral commitments from universities, so interest has been good.”
“We’ve said repeatedly that the Patent Utility is specifically designed to be a mass market solution for companies that are currently frozen out of the patent system’s benefits due to the high costs and complexity of navigating today’s patent marketplace,” Ellenthal added. “More operating companies will now be able to tap into new commercial opportunities hidden in the U.S. patent database and patent owners big and small can now enter into sensible commercial deals that benefit both sides, without the expense or risk of involving the court system.”