Identifying patents for sale
In most cases, purchasers will seek to purchase all patents and pending patent applications within each patent family being purchased. Therefore, purchasers should identify the members of each patent family (including foreign counterparts) that claim common priority to the patents in the sale listing. This information is usually available from commercially available patent search tools.
Check maintenance fee status and patent term
Make sure that maintenance fees have been paid for all patents you purchase. If a patent has recently expired due to unpaid maintenance fees, you can usually reinstate the patent by paying a penalty. Also, find out when the next maintenance fee is due and the estimated expiration date for each patent.
Verify ownership
Use the online databases of each country’s patent office and commercially available patent search tools to verify that the current assignee of the patent is the company seeking to sell the patent. If the patent has been assigned before, such as from an inventor to an employer, review the contents of the recorded assignment agreement. Each assignment is important; a flawed assignment can affect the validity of all subsequent assignments.
Check file review history
The file prosecution history includes all communications between the applicant’s agent or attorney and the national patent office. Review the prosecution history to ensure that it complies with applicable law. Also, ensure that the prosecution file history does not contain statements from the patent agent or attorney that may narrow the scope of the patent claims, for example, by explaining the meaning of a claim term in a way that narrows the meaning of the claim.
Confirmation of the scope of the claim
For any major claims in the portfolio being sold, purchasers should review the scope of the patent claims, which should involve obtaining the opinions of both technical and legal subject matter experts.
Novelty and non-obviousness check
For key patent claims, potential purchasers should also conduct a prior art search to ensure that the patent claims were novel and not obvious at the time of invention.
Checking the encumbrances
Purchasers should review any encumbrances regarding patents, including license agreements, government funding obligations, liens, and enforcement restrictions. License agreements are particularly difficult to verify because they are often protected by confidentiality clauses. Therefore, in a patent sale and purchase agreement, sellers are typically required to represent and warrant the existence and scope of any existing license agreements.
Checking the litigation records
Research past or ongoing litigation related to your patents. Understand if any of your patents have been challenged or upheld in court.
Economic risk and the value of patents
The financial risks and value of buying (or not buying) a patent can vary widely. Here we outline some important items to consider.
Financial risks associated with purchasing patents
There are several economic risks involved in purchasing patents. If a purchased patent is determined to be invalid or if the claims are narrower than expected, the value of the patent to the buyer will be reduced. This risk can be significantly mitigated by legal and technical due diligence as described above.
There are also financial risks to not purchasing a patent. If another company purchases the patent, the company that did not purchase the patent must license the patent or face the risk of litigation, which could result in damages or an injunction to stop the sale of the product. If another company purchases the patent, that company may become a competitor in the market, resulting in the company that did not purchase the patent losing market share and profits.
The value of purchasing a patent
Patent buyers can derive a variety of value from their patent purchases: they can license the patents for revenue, they can cross-license the patents with other companies to gain freedom to operate, or they can license the patents to another company for business benefits such as secure distribution channels, manufacturing capacity, or product sales.
Patent buyers can also use patents to exclude competitors from the market, increasing their revenues and profit margins.
If a company is being sued for patent infringement, it can purchase the patent for a counterclaim in an attempt to settle the case with the plaintiff.
Depending on the use of the patent, the value of the patent to a purchaser can vary greatly. Therefore, it is always difficult to establish a market value for a patent.
We recommend seeking the assistance of an intermediary or attorney experienced in buying and selling patents to avoid risk and create value from your patent purchases.
