Explained: patent properties and the United States Patent Utility

17th February 2015

Jon Ellenthal, Vice Chairman and Chief Executive Officer at Patent Properties, explains how the United States Patent Utility – a voluntary licencing marketplace for patent owners and users alike – could help more businesses to exploit the licencing potential inherent in their patents.

What is the Patent Utility designed to achieve?

“The Patent Utility was built to unlock the trillions of dollars worth of technology improvements trapped inside the U.S. patent database and make them available to small and mid-sized companies for the first time.”

“The Patent Utility has a simple mission: making the benefits of patent use available to a much broader universe. As a nation and an economy, we need to do a much better job of converting intellectual value of America’s 2.3 million active patents into commercial value, new jobs and economic strength without involving the court system.

“What does this mean for the U.S. economy? We asked two of our nation’s most respected economists, Robert Litan of Brookings, and Hal Singer of Economists, Inc. to look into this question. In their report, ‘Unlocking Patents: Cost of Failure, Benefits of Success, they concluded that just a marginal increase in patent licensing would add $200 billion in annual U.S. economic output. This is a number that should get everyone’s attention.”

Why does the world need a solution like this?

“In many ways, we are pursuing a mission similar to what ASCAP, SESAC and BMI have done for the music industry – to efficiently create and administer a huge volume of low-cost licenses, with an emphasis on the “full catalog” of music rather than just music from the biggest stars.

“While ASCAP has been around for 100 years, the patent industry is still looking for a practical licensing solution that will work for the mass market of patents and American operating companies. Clearly, the inherent lack of definitiveness of patent rights creates a much trickier set of licensing issues than music.”

What are the potential benefits of a solution like the Patent Utility?

“To stay competitive in today’s tech dominated economy, every company today, regardless of size and industry, needs to answer three basis questions about 3rd party technology:

  1. What 3rd party technologies can help us improve our products and services faster?
  2. What technologies are our competitors investing in that may show up in future products & services?
  3. What 3rd party owned technology might we be trespassing on without knowing it?

“The patent utility will offer a low cost package of tools and services – a suite of information products, expert assistance, licenses and legal fee discounts – that will that help companies of all sizes answer these questions by tapping into the U.S. Patent Database. After all, the U.S. patent database is the world’s largest encyclopedia of technology improvements and technology experts and is the product of trillions of dollars of R&D investment spending.

“Our goal is to make the benefits of this information available to all companies. Ironically, sometimes the most valuable information might not be the patented property itself and instead be the inventor or the inventor’s organization that has the technical expertise, know how and trade secrets that can help another company solve a product development challenge. The patent is the last leg in the R&D process and can serve as an advertisement for all the valuable learning that preceded it.

“In addition to using the new tools of Big Data, the Patent Utility is also based on new thinking about licensing. We have created a new type of license called a No-Fault License that simplifies licensing, particularly for those patents that are currently stuck on the commercial sidelines. No Fault licensing is based on statistical probability rather than legal certainty and is a commercial standard that everyone can afford. The Patent Utility was built to make it easy and affordable for more patents and more companies to enter into sensible commercial deals that benefit both sides – without worrying about the high costs of assigning fault or blame.

“Today, only “home run” patents owned by deep-pocketed companies can afford the high transaction costs of reaching the marketplace and creating commercial value. With the Patent Utility, patented technologies that are marginally or modestly valuable – the “singles” & “doubles” that can’t otherwise afford the high transaction costs of threat based licensing – become commercially useful…in the right hands.

“We are creating a simple and affordable way for many more patent owners and many more operating companies to benefit from America’s patents. And we will do that in a completely voluntary way that takes place outside of the court system.”

Is access to reliable patent data important to the effectiveness of the Patent Utility?

“The ability to collect, aggregate and analyse large data sets and present it in a useable format is very much the enabler for this whole project.

“The only way we can turn patents into a functional asset class is if we can help business people understand and benefit from them and we, along with Aistemos, believe that data and data visualisation is the way to do this.

“ipCapital Group, a business analytics firm, has looked at the landscape of companies that would be well-served by a big-data solution at the center of a comprehensive patent strategy. They have identified a class of companies, 230,000 in all, with revenues between $5 million and $1 billion per year that have filed for at least one patent, and many within this group have filed for more. This shows the potential offered by the Patent Utility to unlock, for the first time in the digital age, huge amounts of American innovation currently on the economic sidelines.”

Category: Publications