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5th May 2020

Patents are now ants

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“ A good way to understand the difference is to consider a colony of ants. A naïve entomologist might seek to understand the colony by examining the ants within the colony. Individual ants, after all, deploy a vast range of behaviours, such as collecting leaves, marching, etc. They are busy and fascinating creatures. And yet you could spend a year, indeed a lifetime, examining individual ants and learn virtually nothing about the colony. Why? Because the interesting thing about ants is not the parts but the whole. Instead of zooming in on individual ants, the only way to understand the colony is to zoom out”. From Rebel Ideas, Matthew Syed, 2019

The modern patent system is less that 250 years old. This pretty much coincided with the first Industrial Revolution. As we enter the fourth Industrial Revolution, the way we need to think about patents needs its own revolution. In 1950 (the start of the third Industrial Revolution), the USPTO received c. 67.000 patent applications. Now it receives over 600,000 applications a year, which is only a third of the new patent applications in China. On 19 June 2018 the US issued US Patent 10,000,000. Patents are now ants.

Here are 5 things you need to know if you own a patent colony:

1.     Patents are networked: Patents don’t have meaning in isolation. This requires both introspection (relevance to your colony and to your business) and an external perspective (your position relative to other patents owners). Achieving this vision requires both leadership and strategy, because too much focus on individuals and not enough on colonies will not provide you with the holistic view you require.

2.     Most colony owners are not aggressive: In early colonial times, owners used to groom individual patents to defend monopoly pricing and deter competitors from invading their territory. While this remains true in areas such pharma and biotech, the vast majority of colonies are used to neutralise threats from other colony owners.

3.     Not every patent is a queen: At any given time, 80% of the value of a patent colony will be captured by 20% of the portfolio. Drone ants die after mating and never leave the colony, and female ants do all the work. It’s essential that you don’t persuade yourself that your portfolio is unique. The law of large numbers always prevails.

4.     There is an optimum size for patent colonies: Having a large patent colony communicates nothing more than you spend a lot. It’s only by understanding your patent colony, in the context of the business and all other patent colonies can you build a colony of the right size and shape.

5.     Patent data is transparent: it’s impossible for the Hokkaido ant colony in Japan to know that it’s larger than the leafcutter colony in Brazil. Fortunately, patents, being a totally human construct, solve this problem by design in that patent data is publicly available. Better still advances in machine learning have automated access to accurate data. So much better that counting one (pat)ant at a time.

Which brings me back to Mathew Syed and his observation that “ … you could spend a year, indeed a lifetime, examining individual ants and learn virtually nothing about the colony”. This was a perfect analogy as to why Cipher takes a different approach to patents.

Strategic Patent Intelligence (SPI) has been implemented to enable owners to take a holistic approach to the design of their portfolio. It supports those who need to communicate the importance of patents to teams that know little of myrmecology but control the budgets and are ultimately responsible for managing business risk. SPI recognises that it’s essential to know through your own technology lens what others are doing. This is more than traditional benchmarking or conventional competitive intelligence, it requires the design of economic models that are always on, monitoring the shift in patent colonies and provided patent leaders with the information critical to enabling the colony to survive and thrive.

These are some of the reasons why the time for strategic patent intelligence is now:

  • Over $40bn spent on patents a year: this much money cannot be swept under the carpet, and requires substantive justification. The era of more patents good, less patents bad is over. The recent Cipher Report on Portfolio Optimisation states that 71% of patent budget is spent on filing and renewal. The current economic crisis triggered by COVID19 means that these budgets will be under increased scrutiny, and if cuts need to be made, owners require strategic vision, not a better microscope for examining the anatomy of an individual asset.
  • The majority of enterprise value is intangible: existing approaches to understanding corporate value is heavily weighted towards the financials published in company Reports & Accounts. There is little to no transparency for intellectual property rights (IPRs) – with patents being material for over a million companies across all sectors and in all geographies. It should therefore come as no surprise that the recent Cipher Report indicated that in over 60% of companies the C-suite require data on patent strategy.
  • Recession fuels patent risk: previous recessions show that patent litigation increases. When technology companies fail, it is often only the IPRs which are left. If these fall into the hands of NPEs (companies purely focussed on monitisation), litigation follows. While organisations such as RPX, LOT, OIN and AST are better placed than ever to mitigate these risks, this is just another example of colonies – this time the collective impact of multiple patent owners all aligning to the same objective. In every case it is the power of strategic patent intelligence that creates asymmetry of information, enabling owners with more information to make better decisions than those with less.
  • All sectors are connected: the fourth Industrial Revolutiona world where there are over 50 billion connected devices by 2030, means that all sectors are technology sectors. This era requires fresh thinking around the role of patents. Gone will be the days where the individual patent will be heralded as best of breed, in favour of a richer understanding of how a patent technology contributes to the bigger picture.
  • The pace of technological change: in the introduction to our IP Strategy Report 2018 I noted that “half of the Fortune 500 companies in 2000 have disappeared and the average age of an S&P 500 company is under 20 years old, down from 60 years in the 1950s. The disruptive force of technology is the main cause. Kodak went from its top 50 spot in 1995 to a Harvard case study on the impact of disruption”. The impact on patent strategy is no less significant. Predicting what are important patents is hard, which is why modelling using SPI is so important. Patent owners have to be connected in real time to what’s important to their company and what’s going on with patents owners globally. If you don’t have access to real time data, then you will hold on for too long and move too late.

Only by studying patent portfolios in business context and all other relevant patent portfolios can you make evidence-based strategic patent decisions. This does not detract from the essential work of all others who support the patent ecosystem – from the inventor to the Patent Offices, from the docket management system to the payment of renewal fees. Each and every patent has a value. That value is not the same – and changes all the time. Only through the lens of strategic patent intelligence can you escape the natural instinct to love your favourite ant in favour of the health and welfare of the colony.

by Nigel Swycher, CEO of Cipher – published on LinkedIn

With Cipher you can…

Optimise your portfolio

Ensure you have the right portfolio to meet your strategic patenting objectives.

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Gather competitor intelligence

Understand who’s doing what by automating patent to technology mapping.

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Model cross licensing

Combine patent and revenue data to determine rational licensing outcomes.

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Manage your budget

Justify patent budgets to CFOs and others to communicate the impact of your investment.

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Conduct due diligence

Automate manual reviews for efficient execution of M&A and licensing transactions.

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Tackle patent assertion

Be prepared with evidence to create a fast and effective threat assessment.

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Benchmark your portfolio

Assess your portfolio in comparison to other owners through your technology lens.

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Monetise your portfolio

Identify opportunities to create value through licensing or sale of patent assets.

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Improve your patent strategy now

Speak to one of our Cipher team today.