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9 Out of 10 Patents are Probably Worthless: Why and How to Prevent this from Happening to You (Part 1 of 4)

I decided to start 2010 with a controversial premise:  what if 9 out of 1o patents--or 90 %-- issued in the US were worthless?  Believe it or not, but this probably is not too far off the mark.  By "worthless," I mean that it is likely that only 10% of patents in force today meet each (and every) of the below criteria:

1)  The patent directly or indirectly protects a product or technology that is being sold in the market today;

2)  The patent covers a product or technology where there is or likely will be viable competition in the marketplace such that a patent is needed to legally restrain competition; and

3) The patent owner is ready, willing and able to bring a patent infringement suit against an infringer or it is likely that your competitor believes that it will possibly do so.

Unless

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Seeking to Sell Your Patent to a Big Company? Think About These Negotation Tips

Over the past year of so, I have become friends with Victoria Pynchon, an accomplished California litigator and ADR expert.  She is a great source of information for people seeking advice in the area of ADR and negotiation, whether IP or otherwise. 
Victoria has just posted some information that I think will be of great use to any entrepreneur or start up that is seeking to sell their patent(s) to a larger entity.  Except for very rare circumstances, these IP owners will be at a significant disadvantage in comparison to the company to which it seeks to sell.  This post, entitled "More on Bargaining from a Position of Weakness" should be the first step before any small IP owner approaches the possible purchaser to help them understand how to succeed in the typically highly uneven bargaining process.
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A Patent Reality Check: Litigation Not a Viable Revenue Source for Most Inventors

The ability of an intrepid inventor to strike it rich from a great idea seems to be embedded in the DNA of many Americans.  Perhaps this view emanates from the presence of patents in the US Constitution, which could create a feeling that US citizens have an "inalienable right" to use patent protection to their advantage.  Alternatively, people may perceive the occasional media reports of successful inventors and substantial patent litigation awards as a signal that patents can serve as a path to wealth for those with great ideas (certainly, this is the Hollywood view).  In truth, however, getting rich merely from a patent is a rare occurrence--maybe not as low a probability as winning the lottery, but the odds are incredibly long that any person can make money from a patented idea alone.  Think about it: if all it took was a patent to make someone wealthy, there would be

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The NY Times is Wrong: Patent Auctions Do Not Provide Indendent Inventors with “Protection”

Patent auctions will do little to help independent inventors sell their patents
Patent auctions will do little to help independent inventors sell their patents
Those seeking ways to generate revenue from their patentable ideas will find the recent NY Times article entitled "Patent Auctions Provide Protections for Inventors," written by Steve Lohr, to be an interesting read.  However, as someone who works with entrepreneurs and corporations wishing to monetize their patent rights, I find it necessary to comment on the assertion that patent auctions can operate to "provide protections" for independent inventors, as well as the underlying premise that these it is generally possible for non-corporate inventors to generate value from their patent rights irrespective of the underlying subject matter of the patents.*  As an initial matter, the NY Times article states that "[independent inventors] can often find themselves in court, battling

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Improve Your Chances of Obtaining a Patent at a Reasonable Cost and Time by Demonstrating the “Wow Factor” in the Application

A strong majority of people seeking patent protection to protect their products or technology leave the details the drafting process to their patent attorneys. That is, given the specialized (and, frankly, arcane) nature of the patenting process, even highly accomplished business professionals believe that a patent specialist (i.e., attorney or agent) is better equipped to understand how to best describe their invention to the US Patent Office (“USPTO”). This can be an ineffective way to handle the front end of the patenting process because it can result in the process being more contentious. Such contentiousness can result in narrower claims than desired and can make the patent take longer to issue and make the process considerably more expensive. In determining whether a client’s invention meets the legal requirements for patentability, a patent specialist thinks about how to legally distinguish the invention from those that have come before. Specifically, the patent specialist

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Start-up Entrepreneurs & CEO’s: If Your Goal is Investment or Acquisition, You are Probably Patenting the Wrong Things

Do you treat your patents as a fence or a tollbooth? If you wish for your start-up technology company to obtain investment from or acquisition by a bigger player, you had better understand the difference. Most start-up technology company entrepreneurs and CEO's understand that patents can be key to establishing the value of a new business idea. Typically, entrepreneurs and CEO's such as yourself will engage patent attorneys to build an IP portfolio that protects the start-up's technology and products to the fullest extent possible. The motivation for this effort and expense is, of course, to to protect your start-up's idea from use by others. As management of a start-up you may be seeking to build an ongoing business around the patented technology, but often the goal of building a solid patent portfolio is to make your business an attractive target for investment or acquisition by a larger company. I believe that

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50% of Venture Capital Investment is Lost: How Your Clients Can Improve These Odds by Using the Right Patent Analytics

lost vcTHE SKINNY ON THE QUALITY OF VENTURE CAPITAL-RELATED INVESTMENT DECISIONS If you are a counselor of venture capital firms or entrepreneurs who owning start-up companies that are targets of venture capitalists, you might already be familiar with the high rate of failure associated with such investments. Nonetheless, you may be surprised to find out that 50% of all money invested in venture capital is a loss. This figure, which is based upon separate research projects by a Chicago Graduate School of Business (“GSB”) professor and a former Chief Economist at the Securities and Exchange Commission, indicates that the actual return on venture capital investment is not much different from the average annualized returns on the smallest NASDAQ stocks. In particular, the return on venture capital investment from 1987 to 2001 in these smallest stocks was 62% as compared

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Entrepreneurs: Ask 2 Simple Questions to Determine Whether IP Strategy is Critical to Your New Business Venture

Intellectual property ("IP") is often a subject that is "out of sight, out of mind" for entrepreneurs who are launching new business ventures. And, why shouldn't it be: business schools rarely teach much about law in general, let alone about the highly specialized world of IP law. Since non-business school trained entrepreneurs generally take their cues from the methods of their colleagues, it follows that a significant majority of entrepreneurs likely do not consider IP to comprise a necessary step when they are formulating their business plans. My conversations with entrepreneurs from all backgrounds over the years bears this out. When IP does form a fundamental basis of an entrepreneur's new venture, it is likely because scientific or technical subject matter forms the basis of the business. In this context, it makes sense that the scientific or technical core of the business model must be protected by seeking patent coverage. While

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Investors in the Green Economy: You Could Lose Your Investment in Green Innovators by Failing to Identify the Green Inventors that Came Before Them

With President-Elect Obama's announcement that he will establish an "Apollo Project" to develop a Green Economy, there is no doubt that "the Green Technology train has left the station." Indisputably, investors will start to invest heavily in companies that appear to possess commericializable Green Technology that will enter the marketplace as the US embraces the Green Economy and develops the necessary infrastructure to make this happen. Before staking a claim to one or more of these companies, however, investors should understand whether existing patent rights owned by third parties could undermine the investment potential of even the most promising Green Technology innovators. Anyone seeking to capitalize on the Green Economy and its attendant Green Technology must recognize a fundamental reality of US patent law: in granting a patent, the Patent Office cares only that an invention is useful, novel and nonobvious. Significantly--and this is the rub for investors in Green

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Learning from Microsoft’s Hard Trademark Lesson: Your Company Needs a Multi-Faceted IP Strategy

This New York Times article entitled "A New Battle is Beginning in Branding of the Web" demonstrates that companies such as Microsoft and Dell are adopting aggressive Intellectual Property (IP) strategies that include forms of legal protection others than patent rights. The basis of this approach might not be obvious to those who consider these companies "technology companies" at their respective cores. That is, the product lines of Microsoft and Dell (and their counterparts) might more logically be considered by some to be the subject matter for patents, as opposed to trademarks. Nonetheless, the article confirms that more and more companies are reaching outside of the traditional mode of technology patent protection to develop comprehensive IP strategies directed toward creating IP value in multiple dimensions. It is interesting to find out that Microsoft apparently learned the lesson of the need for an IP strategy by almost making a colossal