1.5 The value and uses of patent information
1.5.1 The cost of insufficient patent information searching
Patents constitute a rich source of technical and commercial information. A search conducted to identify prior art, available worldwide in any format or language within the relevant technical field, is referred to as a state of the art search.
Before initiating any research activity, it is essential to determine what has already been done worldwide in the relevant field in order to avoid wasting time and resources on matters that are already known.
Insufficient use of patent information leads to significant waste in R&D expenditure. For example, estimates suggest that European industry loses up to US$ 20 billion annually due to the underuse of patent information, resulting in duplicated efforts such as reinventing existing inventions, resolving already solved problems, and redeveloping products already available on the market.
In many cases, patent information can be used to develop new products and processes, as well as to identify technological trends. This represents an important and legitimate use of the patent system, provided that the new product does not infringe the claims of existing patents.
1.5.2 The cost of litigation
Introducing a new product into the market in a given jurisdiction without conducting a freedom-to-operate (FTO) or infringement search to determine whether any patents are in force in that country that the product might infringe can lead to costly legal proceedings and potential liability for damages. Conducting such a search at an early stage enables informed decision-making before incurring the costs of marketing, manufacturing, or importing. It may be the case that no relevant patents in force exist that could be infringed. Conversely, if relevant patents in force do exist, possible options include withdrawing from the market, negotiating a license with the patent proprietor, designing around the patent, or seeking invalidation of the patent (if permitted under applicable law).
Furthermore, if an allegation of infringement arises, a primary defense may involve challenging the validity of the patent in question. This is where a validity search becomes relevant. This involves searching to determine whether, at the time the patent application was filed, any prior art existed showing that the claimed invention lacks novelty or inventive step. Although the relevant Patent Office will have conducted a search before granting the patent, it is possible that relevant prior art was not identified. Identifying the closest prior art will, in any case, help assess the strength of the patent and may support negotiations with the patent holder. It may even lead to the withdrawal of legal action, allowing the product to enter the market.
Note: This topic is also discussed in Unit 5, Section 5.
1.5.3 Using patent information in corporate strategy
For corporations and individuals seeking financial returns on investment, the use of patent information for strategic business advantage may be even more effective than relying solely on technical content. Patent information can be used to monitor market trends and generate intelligence about competitors specifically, what products they are developing and where they intend to market them.
Well-informed businesses can assess the technical and product focus of their competitors by analyzing their filed applications and granted patents. For example, an investor may evaluate a company’s strength based on its patent portfolio in a particular technology area and decide whether to invest in that company. Market intelligence on technology trends and R&D investment decisions can be derived from patent information searches. The names of individual inventors may also be valuable information for competitors seeking to attract and recruit talent.
As will be discussed in Unit 3, patents have become an important element in merger and acquisition due diligence, and patent information searches are often used to assess the value of a patent portfolio in investment or acquisition contexts.
One of the most important uses of patent information searches is identifying potential business partners and licensing opportunities. Searching databases using patent classifications is an effective way to identify other companies operating in a specific field—whether the objective is to license in (i.e., acquire rights to use a technology owned by another party), license out (i.e., grant rights in a technology developed by the company), establish a joint venture (combining R&D efforts to develop, manufacture, or distribute products), invest, or attract investors. A company seeking licensees, partners, purchasers, or investors in a specialized area can use patent information searches to identify businesses with complementary capabilities.
Using patent information searches to support inbound licensing can be highly beneficial. In some cases, companies can identify underexploited technologies that have not yet been commercialized. While it is important to carefully assess why the technology has not been exploited, in certain situations a license for such technology may represent a valuable business opportunity. This may involve exploiting the technology in a different geographical market, adapting the technology, or applying it to a new use. From the licensor’s perspective, licensing a strong technology that is not yet exploited in a particular market can generate additional revenue.
Similarly, a licensor may find it attractive if the licensee has the technical capabilities to manufacture products based on the technology or to adapt and improve it. Such modifications are often referred to as improvements or enhancements; the licensee may propose cross-licensing such improvements to the licensor as a way to add value to the agreement and potentially reduce royalty obligations. Companies with strong technical expertise will have a clear advantage in such negotiations. It is also possible to involve third parties, such as universities or research institutions, to add further value to a collaboration. These arrangements can create a “win-win” outcome for all parties. One direct way to identify potential partners is through patent information searches. A patent in a key technology area can signal that a company has made a significant investment in that field and may be interested in proposals to maximize the return on that investment.
Patent information searches can also be used to support outbound licensing of a technology or product. Inventors in developing countries can use such resources to identify potential licensees or investors for locally developed technologies. In many cases, valuable knowledge and expertise exist in developing countries that can help address specific challenges. However, local investment capacity may be insufficient to commercialize such technologies. The existence of a patent application filed by a company from a developing country can enhance credibility and visibility, thereby helping to attract foreign investors or licensees.
Patent information searching may also be used to identify technologies that are not patented in the country where the company operates (see Section 1.5.5). There are no restrictions preventing a company from using an invention in countries where patent protection has not been sought. However, even if the company is legally free to use the invention, fully exploiting it may require access to the patent holder’s know-how, documentation, training, trademarks, or related patents. Therefore, the company may still wish to establish a business relationship with the patent owner to obtain these additional benefits, even though a patent license is not legally required.
1.5.4 Technology transfer and foreign direct investment
Patents can serve as valuable assets for attracting investors to a company. As will be discussed in this part of the course (see Case Analysis 1–4), when a patent is granted to a company operating at the forefront of a particular technological field, other entities working in similar areas, as well as the financial sector, are likely to take notice.
If the company is a foreign entity, this may lead to technology transfer through licensing and Foreign Direct Investment (FDI) in the company. Wikipedia defines FDI as “a controlling ownership in a business enterprise in one country by an entity based in another country.” The FDI relationship involves a parent company and a foreign affiliate, which together form a multinational enterprise, with the parent exercising control over the affiliate.
1.5.5 Territoriality and the use of patent information
Territoriality means that a patent provides protection only within a single country or a group of countries; there is no such thing as a global patent. Consequently, a Japanese patent provides protection only in Japan, while a US patent provides protection only in the United States these are known as national patents. In certain regions, it is possible to obtain regional patents covering multiple countries. These are granted by regional organizations such as ARIPO (the African Regional Intellectual Property Organization).
The territorial nature of patents is important for two main reasons in relation to the use of patent information. First, as discussed in Section 1.5.2 above, before launching a product in a particular territory, a freedom-to-operate (FTO) search can identify patents that are valid and in force in that territory and that the product might infringe. Second, patent searches can reveal whether a technology is protected in a specific territory.
“As patents have a strictly territorial effect, industries in these countries could use information disclosed in patents filed in foreign jurisdictions, as such technologies are not protected in their own territories.”
Karapinar Baris; Temmerman Michelangelo
Benefiting from biotechnology: pro-poor IPRs and public–private partnerships;
Biotechnology Law Report, 27:3, 189–202 (June 2008)
This can highlight opportunities to use a technology in a given jurisdiction where no valid patent protection exists.
1.5.6 Patent mining
With rising R&D expenditures and rapid technological advancement leading to shorter product life cycles, the idea that technology can be acquired or licensed rather than reinvented is increasingly being adopted. This means that investors often seek to license in the technology they need instead of developing it independently. For this reason, they engage in what is known as patent mining, searching patent information for the latest technologies in a specific field. Their objective is to avoid the high costs associated with developing an invention from scratch.
Patent mining is typically most effective when a company identifies technology that is complementary or related to its core business. The company may then be well-positioned to evaluate the patent and to develop and commercialize it in ways that the owner has not. Patent owners are often willing to license or assign patents for various reasons. One reason may be that a particular geographic region or market segment is not of interest to the owner. In some cases, the owner may have developed an invention that no longer aligns with the company’s current business strategy. In other cases, the owner may have previously exploited the invention but no longer uses it, as newer technologies or product approaches have replaced it.
A survey indicated that 67% of US firms hold technology assets that they do not exploit (valued between US$115 billion and US$1 trillion). It is estimated that approximately US$100 billion is tied up in such underutilized innovations within the IP portfolios of major corporations. Rather than continuing to pay maintenance fees, companies may offer such patents for sale or licensing. Maintaining unused patents can be costly, and the average “effective life” of a patent before abandonment is only about 5 years. Only 37 percent of patents are maintained until the end of their full term.
1.5.7 The role of Patent Offices in promoting the use of patent information
The increasing use of patent information by businesses is reflected in the evolving role of Patent Offices worldwide. In a knowledge-based economy, some Patent Offices, such as the Intellectual Property Office of Singapore, have begun supporting local industry and research institutions by providing additional services, including: identifying strategic technology areas; conducting technology and market analyses; performing patent mapping and searches; and supporting IP management, technology roadmapping, and product development strategies.
This trend has expanded the role of Patent Offices in patent information searching: they now act as technology information hubs, providing a range of services to users of patent information.
Policymakers have been influenced by economists’ findings that a country’s economic growth is affected by government intellectual property policies (see Unit 2). This recognition of the importance of “endogenous growth theory” (which suggests that economic policy and external factors can drive growth) implies that governments should prioritize policies that encourage research and innovation to build a strong domestic technological base. In this context, policymakers can influence economic development by implementing patent policies that are well adapted to local conditions.
In previous decades, many developing countries recognized that technology transfer from abroad had limited impact on economic growth or the development of a knowledge-based economy unless it was accompanied by mechanisms that enabled local researchers, engineers, entrepreneurs, and innovators to build upon the transferred technology. Simply attracting foreign technology-based companies for investment and manufacturing is not sufficient; technology transfer alone may be limited in effect. In other words, technology transfer is not a one-time event. When effectively implemented, it is an ongoing process that requires active participation from both foreign and local stakeholders. Some Patent Offices now play a role in planning and advising on such initiatives.
How does intellectual property support the technology transfer process? Part of the answer lies in the development of domestic (“indigenous”) technologies. In many countries, particularly developing ones, public research institutions and universities are primary sources of knowledge. Both fundamental and applied research are often conducted in government-funded and academic research programs across fields such as chemistry, medicine, engineering, and physics. It is essential for policymakers to establish a framework in which intellectual property (especially patents) is used to incentivize these institutions to transfer and commercialize knowledge by linking public and academic research with the private sector. Patent Offices are increasingly involved in facilitating collaboration between industry and academia.
The Secretariat of WIPO assumes no liability or responsibility with regard to the transformation or translation of the original content. World Intellectual Property Organization (WIPO) (2023). WIPO Patent Drafting Manual, Second edition. Geneva: WIPO. DOI: 10.34667/tind.44657