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Patent valuation for technology transfer – Part 2

Second part of the interview with Alan Engel, President at Paterra, Inc. and international advisor for technology transfer at the Japan Science & Technology Agency. The day after the first part of this interview appeared, Japan’s Tohoku-Pacific Coast suffered one of history’s largest and most devastating earthquakes and tsunamis.

ipe:    Alan, how did the recent earthquake and tsunami disasters shape your thoughts on patent valuation and technology transfer?
Alan:     In the aftermath of the disaster, I decided to focus attention on how patent valuation and technology transfer can contribute to this region’s recovery and future vitality. This focus will shape my remarks, but in a way that many in Europe and the U.S. may recognize. Tohoku residents’ stubborn pride and resilience in the face of declining, even extinct industries, coal mining, steelmaking, copper, whaling, and fishing, will remind Americans of their Appalachias and Europeans of their Sheffields.

Tohoku’s fishery and seafood industries have been in crisis for years. World fisheries are being depleted, and the workforce is ageing and shrinking. Then in a few minutes, 90% of their fleet was gone along with a similar share of processing facilities. Although a high priority, this industry’s revival cannot happen without significant transfers of modern technology. Valuation will be indispensable to these transfers.

ipe:    Now, let's talk about patent value. A patent is a protective right, not a commodity. How can it have a value?
Alan:    A patent is an exclusionary right. It allows its owner to exclude competitors from a market by blocking them from using the patented technology. So, fundamentally, the traditional value of a patent is the value of the market that it protects.

In high technology, however, patents have a secondary use that may override traditional market protection. This use is as offensive legal weapons. A single high tech product such as a computer may contain thousands of patented technologies. The incremental value of each technology may be small, yet an infringement lawsuit for even one of the patent could easily threaten more than and cost more than this incremental value.

ipe:    Is this the reason why patents are often traded or transferred in bulk amounts?
Alan:    Exactly. High-tech companies acquire large defensive patent portfolios that allow them to countersue infringement plaintiffs in a mutually assured destruction scenario. Google’s recent stalking horse bid of US$150,000 average for 6000 Nortel patents highlights this scenario.

Patent valuation tools such as IPscore currently treat patents as protecting identifiable markets, the traditional valuation scenario. An implication of this approach is that if a market cannot be identified, the patent cannot be assigned a value. This does not mean that the patent has no value; it simply means that the value cannot be known.

Of course, there are degrees of knowledge and IPscore accommodates these with risk/potential questions. But the key point is the better the knowledge of the market, the better the quality of the valuation.

ipe:    What about expired patents, or patents that have been revoked. Are these worthless?
Alan:    This question must be approached with these patents’ contexts in mind. Patents that exist in isolation, without a family of related patents and know-how, are likely to be less valuable anyway. Keep in mind that the patent is not the technology. So, even if market exclusivity is not protected by the patent, the technology may improve an innovation consumer’s ability to participate in a market.

ipe:    What would you tell an organisation or department to do to increase the value of its patent portfolio?
Alan:    This question points up one of the merits of patent valuation tools such as IPscore. I have found that simply going through its set of questions with a faculty inventor can be quite eye opening. Sometimes a more valuable invention is in the inventor’s work, but hidden by disciplinary blinders.

ipe:    So, trying to value one's patent portfolio can spark new inventions?
Alan:    That's right. For example, one IPscore question is about the breadth of the claims. Working through it with one inventor, I found an amazing but correctable lack of understanding about claims; this inventor had written his claims to avoid infringing certain parties – including organized crime. Simply reworking these claims with the objective of maximizing breadth revealed an invention that he had overlooked, but which had much greater potential market impact.

ipe:    What other advantages did you experience while working with patent valuation tools?
Alan:    Working through patent valuation tools such as IPscore often reveals ways to reduce risk and increase potential without investing in further experimentation. These ways are often a matter of conducting better searches and filling in missing information. Because patents protect markets, usually one of the quickest ways to improve a patent portfolio is by improving knowledge of these markets. IPscore evaluation also provides an objective means of helping faculty further improve their better inventions and let go of weaker inventions.

ipe:    Do you see special opportunities for your region now, after one of the largest natural disasters in history?
Alan:    Out of crisis comes opportunity. The devastation and rebuilding of Tohoku’s seafood and fisheries industry may provide a good opportunity to place simple, constructive patent valuation tools into the hands of a traditional industry that needs to modernize quickly.

About: Alan Engel founded Paterra, Inc. (initially named International Science and Technology Associates, Inc.) in 1986 after postdoctoral research in the Japan Science and Technology Agency’s ERATO project on fine polymers. After initially focusing on Japanese science and technology affairs, Paterra has provided industry with machine translations of Japanese patents since 1996. Inventor of IPC-based disambiguation in machine translation, Paterra launched the first completely automated Internet service for patent translation in 1999.

After moving Paterra, Inc. to Japan in 2007, Dr. Engel founded TT Crossroads for the purpose of developing and applying patent analytical methods to technology transfer. TT Crossroad’s current focus is developing IPscore into a free, worldwide standard for technology transfer.

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