Home Management Why Patents Lose Money:
Is Your Attorney At Fault?
Why Patents Lose Money: Is Your Attorney At Fault?

Why Patents Lose Money:
Is Your Attorney At Fault?

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Patent Law and litigation is a complex field which requires a team of very specialized attorneys to work toward the client’s goals. Patent lawyers are finding there is a big problem with the U.S. patent system leading to serious losses for the inventors. But, why? What is the cause of the losses for patented items?

We invited Mr. Craige Thompson, patent lawyer and author of the book ‘A Portfolio Manager’s Guide to Patent Offense’ to discuss:

LIM:  What exactly is a patent?

C.T.:  The standard answer to what is a patent is a right to monopolize an invention for a limited term of 20 years from the date you apply for the patent. To businesses, there are a number of ways to monetize a patent that I list in the book including: royalty income from licensing in one or more fields of use, command premium pricing, prevent competitors from copying your success and undercutting pricing, selling the patent, use as a bargaining chip to avoid or exit litigation, and to sue a competitor to recoup your lost profits.

LIM:  How did you decide to go into patent law?

C.T.:  I believe that one of the most exciting parts of patent law is that it puts you at the intersection of complex law, technology and business, and allows creative opportunities to add value in all three dimensions together! As an electrical engineer, I always loved working with the type of people who are the inventors. Growing up as the son of an entrepreneurial small business owner, and doing every job imaginable in that business, I have always had a passion for business. Although I am personally not wired to be an inventor type, I am absolutely wired to come along and to learn from them and to quickly understand what they have come up with. This is why I am serious about our tagline: We speak fluent engineer! Because it is in my DNA to do that.

Patent law, particularly having a boutique law firm that permits me to exercise creativity in how we serve clients, allows my work to be so enjoyable because I sincerely enjoy the process of understanding new technology and I love the challenge of applying the complexity of the patent laws to those creative ideas in order to come up with a valuable business asset that will help a company compete and grow! Its a trifecta of patent law, high technology, and business value that really excites.

LIM:  As a busy patent attorney, what inspired you to write the book?

C.T.:  I see incredible waste of resources that violate what I have come to call the ‘Goldilocks Rule’ of patents: don’t over invest, don’t under invest, invest just right. As I observed hundreds of patent cases transferred to our firm from many other firms, we couldn’t help but notice how much frustration clients were experiencing because patents take too long to get, cost more than they need to and yield lower returns than they should. As a systems thinker, I set out to reengineer a more satisfying approach to patent law – one that served the clients’ long term interest, even if it costs the lawyer something in the short run. I believe that I have found a better way to approach the process. Once I figured out a better way to take away a lot of client frustration by producing more valuable patents in less time and for less cost, I couldn’t keep those ideas under a rock. I had tested the ideas and my clients were very pleased with the outcomes. After I refined, battle-tested the process and gotten great results, I felt I needed to share these ideas with the community.

LIM:  So, why do most patents lose money?

C.T.:  Since I sell patents, that was not a message I was eager to put out there… but it is true. The reason most patents lose money is because the conventional processes that most attorneys use to get the patents is optimized to maximize fees for the lawyers without enough emphasis on creating a valuable business asset for the client.

If I had to boil it down to one key cause that has the effect of millions of patents that never generate a dime a revenue, it would be the perverse incentive for patent lawyers and agents to increase the number of times a patent pending application goes back and forth with the examiner. Each time the patent application goes round and round with the patent examiner, that round starts with the Patent Examiner rejecting the application in what is called an “office action.” To respond to an office action typically costs several thousand dollars in attorney fees and each round typically adds 6 months (and sometimes much more) to the length of time it takes to get through the Patent Office. You may have heard that it takes a long time to get a patent granted through the patent office. Typical processes can easily take three to four years (or more) when the process involves 3, 4, 5, 6, 7 (we have even seen 8!) office actions. Sometimes that is what it takes because there are no guarantees in this business, but I have found that a better process can get the job done in 1 or 2 office actions, which means far less cost and time spent in the patent office.

Getting the patent issued sooner opens up all the opportunities for monetizing the patent that I mentioned earlier. You can make a lot more return from a patent that is granted than you can make from a patent that is pending in the Patent Office and may never be granted. I believe this problem is fixable. What I have observed from hundreds of files that have been transferred to our firm from other firms, is that many law firms do not find a way to minimize the number of office actions. As an engineer, I think in systems and my approach to solving this problem is to optimize the patent process to maximize the value of the patent as a business asset while minimizing the cost and delay in the patent office. This approach introduces some radically different elements.

LIM:  Do you find there is more litigation in patent offense or defense? Why?

C.T.:  To answer the question, the amount of litigation is exactly the same for offense and defense because litigation is offense to the patent holder and defense to the accused infringer. Let me clarify my terms: when I talk about “patent offense” I am referring to activities directed to acquiring patent rights for your company. Offense includes creating, obtaining, enforcing and monetizing patent rights that can generate revenue, cash flow and build an asset on your balance sheet. When I talk about “patent defense” I refer to the risks you face from infringing patents owned by someone else. These can be big expenses or negative cash flows and can impair your assets, such as inventory that you may be forced to either dispose of or pay a stiff royalty to the person who holds the patent. Personally, I have worked on many patent litigation cases, but I am not a litigator. My role has always been to support the litigators in two crucial ways: (1) I do the engineering or technical analysis to assess the technical infringement or validity issues; and (2) I do the patent legal analysis to come up with the winning legal arguments applying all the substantive patent legal doctrines and patent prosecution experience I have had from thousands of negotiations with the patent office examiners.

For more information about Craige Thompson and his practice, go to www.thompsonpatentlaw.com. And be sure to check out C.T.’s new book ‘A Portfolio Managers Guide To Patent Offense’ at www.patentoffense.com.

Alison Lindy Higgins on Email
Alison Lindy Higgins
Alison Lindy Higgins
Alison Lindy Higgins, Esq. is the Managing Editor of Legal Ink Magazine and a member of the California Bar Association with a focus in Entertainment and Fashion Law. Prior to attending law school, she received a post-graduate degree in Fashion Design and earned a degree in English from the University of Wisconsin.

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