Turning Patents into Cash: Three Ways to Monetize

Organizations that build strong patent portfolios can boost their chances of monetizing their patents if they follow a well-thought-out strategy, lawyers from the IP law firm Wolf, Greenfield & Sacks, P.C. and industry experts told attendees at a Boston seminar.

Patents can be cash cows, said Randy

chair of the firm’s electrical and computer technologies practice group. IBM, which owns the most patents, has earned $10 billion from patent licensing deals, while Columbia University has reaped $134 million in royalties. Suing infringers can pay big too: Centocor won a $1.7 billion verdict in 2009, and Johnson & Johnson received a $1.7 billion settlement for three cases this year.

The first step in strategically building a patent portfolio is goal-setting—determining what your patents can do for your organization. Pritzker said. “Do you want to block competitors from entering your market, grow your market share, or make money off your patents?”

Next, identify what’s most important to protect. It could be the core technology or the biggest-selling products. But not always. Look at the competitive marketplace, and try to anticipate future trends, he added.

Consider getting patent protection beyond the U.S. and other developed nations. It’s becoming crucial to get patent protection in China and India, said Steven J. Henry, chair of the firm’s licensing and transactions practice group. Both countries are beginning to take patents seriously, and there are more Korean, Japanese, American, and European companies involved in patent litigation in China and India.

“Make a plan and stick to it,” Pritzker advised. “Resist changing your plan because of business cycles.” He said he’s never come across a firm that was “too aggressive” in filing patents, but has often seen the opposite.

Three ways to monetize

When it comes time to monetizing the patents, there are three primary options: licensing, selling, and litigation/enforcement.

Why sue? Michael Albert, chair of Wolf Greenfield’s litigation practice group, said you often need to sue to get the other party’s attention and show you’re serious. The company’s situation in the market should dictate timing. If you’re trying to block your competitor from entering your market, get an injunction and sue for infringement early, Albert advised.

But if you’re trying to collect a big settlement and royalties for both past and future sales, you’ll want to sue much later on, once the other company has had a chance to make real money with the disputed patents.

The Eastern District of Texas, once the premier venue for patent litigation, has fallen victim to its own success, and its backlog has grown. “I rarely recommend it,” Albert said. Today, more promising venues are Delaware and the organization’s home state. Filing locally can give a company a “home court advantage,” as juries may be more sympathetic to a local company, he said.