2.9.2 Licensing Strategy
When considering the "licensing in" of external technologies, the "licensing out" of proprietary technologies, or entering into "cross-licensing" arrangements between organizations that hold patent portfolios, it is essential to obtain reliable information regarding the target or core technology in order to support sound decision-making.
Technologies with substantial value are often protected by patents because maintaining them as trade secrets can be difficult and risky. As a result, the analysis of patent information can provide significant technical and commercial insights relating to the target or core technology. Before commencing licensing negotiations, it is critically important to develop a thorough understanding of the target technology itself, including its inherent value, advantages, and limitations.
When preparing to "license in" a technology, carry out a detailed examination of the patent information while taking the following considerations into account:
- Determine whether the technology is not protected by patents and therefore falls within the public domain. This may occur because no patent was applied for, the application was refused, a granted patent has expired for any reason, or the patent has been invalidated through a hearing or legal procedure.
- Assess the likelihood of facing an infringement claim from a third party that could result in liability for damages.
- Evaluate whether the technology is being overestimated or underestimated in value by comparing it with other related or alternative technologies.
Likewise, when preparing to "license out" your technology, review the patent information and consider:
- Identify potential licensees within the relevant market.
- Evaluate the value of your technology.
- Determine whether the technology represents a core element of your business, the licensing of which could potentially hinder your own operations.
"Cross-licensing" refers to a mutual agreement between two entities in which they grant licenses for one or more patents to each other. Such an arrangement enables both parties to operate freely without the risk of infringing each other's patent rights. If payments are involved in a cross-licensing agreement, they are generally made by the party whose patent portfolio is considered to have lower value.
Example 1
Company X is negotiating with Company Y. If Company X claims that its patent portfolio is more valuable than that of Company Y, it may require Company Y to compensate for the difference through lump-sum or periodic payments. In such circumstances, patent analysis can play an important role in comparing the patent portfolios of the two companies and identifying key patents, thereby assisting in determining whether payments are required and what their amounts should be. It is common to encounter news reports describing major acquisitions of emerging companies by large corporations. Such decisions may result from comprehensive analyses that quantitatively measure the technological capabilities of the smaller company while qualitatively assessing the value of its patent portfolio.
2.9.3 Supporting Mergers and Acquisitions (M&A)
When a company intends to acquire a specific technology together with related complementary technical information, and does not know the potential sources, it must first identify all entities that hold relevant patents and associated assets. As previously noted, an effective starting point may be a state-of-the-art search concentrating on a defined and current technology. Additional identification can be carried out through a technical activity search. These approaches facilitate the identification of all patents relevant to the field of interest. After identifying one or more potential target technologies or companies through name searches and legal patent searches, the acquiring company may then undertake further patent analyses to narrow down its options and determine the most appropriate acquisition or merger candidates.
Once a target company has been selected, patent analysis can also be used to resolve additional issues, including: Does the target’s technology actually deliver the capabilities it claims? Is the valuation of the company justified? Who are the principal inventors, and will they remain with the merged or acquired entity?
Example 2
As part of a broad strategic effort to strengthen its technological base, Company X, a leading high-technology enterprise, acquired Company Y, a small and specialized firm. Shortly after the transaction was completed, Company X discovered that the R&D capacity of the acquired company was considerably weaker than it had believed at the time of acquisition. Company X later found that Company Y’s technical know-how largely depended on a single key researcher who was not included in the acquisition, as he had been transferred to the parent company before the sale was finalized. If a patent analysis had been conducted prior to completing the acquisition, Company X could have identified the key researcher at an early stage and taken the necessary steps to ensure his continued participation as part of the acquisition.
For additional insights, you may find it beneficial to review the article available at http://halshs.archives-ouvertes.fr/docs/00/18/59/84/PDF/prolificliteraturesurvey.pdf, which analyzes the concept of inventor "prolificness" and their function as "technological goalkeepers."
2.9.4 Guiding the Management of Research and Development (R&D)
In order to successfully enter a new business domain or develop a new product, a company must obtain a comprehensive understanding of the relevant technological environment and accurately anticipate market needs. Patent analysis enables the identification of technological pathways, ranging from foundational innovations to broader technological developments, as well as trends in technological evolution, the lifecycle phases of a technology (including growth, development, maturity, and decline), the challenges and solutions encountered during the advancement of a specific technology, and the technologies and strategies used by competitors to address potential problems. Understanding the lifecycle of a technology allows companies to make informed decisions regarding the appropriate timing of R&D policies and assists in defining strategic direction. Moreover, it can help prevent patent infringement, which may otherwise lead to substantial costs associated with litigation and damages.
Patents are often closely linked to research and development activities and can function as indicators of strong R&D performance. A company holding a larger number of patents compared with another may indicate a greater investment in R&D. Nevertheless, patents differ considerably in their value. Only a limited number of patents have fundamentally transformed technological paradigms, while the majority are granted for incremental and non-obvious inventions that progressively improve existing technologies. Within patent analysis, a patent that receives a higher number of citations compared with other patents of similar age is generally regarded as having greater impact or higher value/quality. By examining the interconnections among patents revealed through citation analysis, it becomes possible to strategically pursue the acquisition of strong patents, which typically reflect significant R&D investment and the development of substantially improved products.
2.9.5 Human Resources Management
It has long been observed that a relatively small group of highly prolific inventors contributes disproportionately to technological progress, whereas a much larger number of researchers generate only a limited quantity of patents within a particular laboratory or company. Patent analysis, such as constructing a "co-inventor brain map" for a company, can effectively reveal the key inventors who are critical to the organization’s future development. These brain maps not only identify star inventors within the company but also highlight important inventors working for competing firms. This type of analysis can be particularly valuable for headhunting activities and for shaping effective Mergers & Acquisitions (M&A) strategies related to human resources. A variety of companies provide patent analysis and mapping tools and services to support these efforts.
*Example 3
Consider a situation in which you are interested in acquiring or collaborating with a company or an inventor who demonstrates exceptional innovative capacity. What are the main considerations when searching for new ideas for your company, and what actions can be taken to support these considerations?
Consideration 1: Acknowledge that certain inventors are more productive than others.
Action A: You may conduct a Google search for "prolific inventors." The website https://en.wikipedia.org/wiki/List_of_prolific_inventors may provide useful information. For example, did you know that Dean Kamen, credited with more than 226 inventions and 1183 patents, also invented the Segway human transporter, shown here on the left?
Consideration 2: You may consider "licensing-in" technologies from a company that has a profile similar to your own.
Consideration 3: You may decide to collaborate with a company that specializes in patent analysis in order to evaluate the performance of other companies within your technological field.
Action B: You have already been introduced to a basic analysis conducted using Patentscope. Many companies provide professional, comprehensive, and specialized patent mapping services across a wide range of technological domains. These services can be explored by performing a Google search for "Patent mapping services."
2.9.6 The Use of Creative Thinking - a Qualitative Analysis of Patents
Patent information represents a valuable source of technological knowledge that researchers and inventors can utilize to identify innovative solutions to technical problems. One notable methodology developed on the basis of patent information is the TRIZ methodology, which is the Russian acronym for the Theory of the Solution of Inventive Problems.
Genrich Altshuller and his colleagues began developing the TRIZ methodology in 1946. Their research was based on the extensive study and analysis of a large body of worldwide patent documents. TRIZ was established on the assumption that universal principles of invention form the foundation of creative innovations that drive technological advancement. The central hypothesis proposed that if these principles could be identified and systematically organized, they could be taught to individuals in order to enhance their inventive abilities. This hypothesis relies on a qualitative examination of the problems addressed in patents and an analysis of the methods applied by the inventors.
TRIZ research has evolved through multiple stages, during which more than two million patent documents have been carefully reviewed, categorized according to their level of inventiveness, and analyzed to extract underlying innovation principles.
Today, TRIZ is applied globally for the development and improvement of products, services, and systems. A broad spectrum of companies, ranging from large corporations (including numerous Fortune 500 companies) to smaller enterprises, apply TRIZ at different organizational levels to solve practical real-world problems and to plan the future direction of their technologies. One of the major conclusions of TRIZ is that inventiveness and creativity are skills that can be learned. As a result, universities around the world have introduced undergraduate courses dedicated to the TRIZ methodology in order to cultivate and strengthen students’ inventive capabilities. Accordingly, patent information emerges as an exceptionally valuable resource for learning and developing a structured approach to problem-solving.
In simple terms, TRIZ is a theory that examines engineering problems and proposes solutions based on their fundamental structure.
One of the 40 TRIZ principles is Segmentation. An example illustrating the segmentation principle is dividing a single object into separate independent components. For example, replacing a large, single-unit truck with a tractor and a detachable trailer.
The seventh principle is Nested Doll (also referred to as "Matryoshka" or "Launce"). This principle involves placing one object inside another, or arranging objects sequentially within each other. A practical example is a set of nested measuring cups or spoons.
Another principle is The Other Way Around (or "Invert Action"). This principle proposes converting movable components into fixed ones, or transforming fixed components into movable ones. For example, instead of rotating a tool to act on a part, the part itself could be rotated.
For additional information, please refer to http://www.triz40.com/TRIZ_GB.php.
From a practical standpoint, patents can stimulate meaningful discussions regarding the most effective methods of applying a particular technology to a specific problem. Nevertheless, companies primarily rely on creative thinking as a mechanism for generating revenue. This raises an important question: where does this revenue originate? Does it come from the product itself, the manner in which its components are assembled, or perhaps from the manufacturing process? For such companies, patents are not merely theoretical constructs; they represent a pioneering source of strategies for interacting with competitors and managing business operations.
By the end of this course, you will have reviewed numerous patent documents that illustrate effective problem-solving approaches and demonstrate continuous improvements from year to year. This experience will enable you to begin answering these important questions on your own.
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