Value of a junk patent and patent strategy of a company was awarded the patent number 7,200.413 by the U.S. Patent Office. It covers “Enhanced Directory Assistance�?, which will deliver keyword specific ad referrals based on user input on the phone.

If you look the lone claim (which defines the coverage and scope of the patent), it requires nine specific steps, each of which can be executed or bypassed. A few months ago, this patent might have had some inherent value but after the Supreme Court’s recent decision on obviousness and what is “patent worthy�?, I strongly doubt it if this patent can survive a spirited challenge.

Also this patent only has one claim, which is extraordinarily uncommon for a non-design patent and generally happens only if the patent offices trashes everything that is initially claimed and throws you a bone.

Some people might refer to patents like these as “junk” patents; they are very narrow and they are vulnerable to various legal attacks; so as a protect able IP component, they have limited value.

However, these patents do serve another important purpose, which is to get noticed by the investors. As soon as the enhanced directory assistance patent was granted, instantly added about $30-$50M to its market cap.

If were to be sued by another company that holds a geo-specific patent, would have the option of cross-licensing it’s patent as a trade.

The point that I am driving at is that building a patent portfolio is not just for creating a defensible IP barrier, but also to attract investors, and to have IP assets available for cross-licensing and bartering.

Some patents might not have inherent value, but they might have tremendous perceived value which is as important!

Patent strategy for a company is different depending on its gestation level, the technology it focuses on, and several other factors. A start-up might benefit from higher number of patents and a stable company might benefit from having more quality patents.

The key to success is to maximize the real, inherent value of the patent and take full advantage of the its perceived value in the market place.

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3 Responses to “Value of a junk patent and patent strategy of a company”

  1. By Murray C. on Jul 3, 2021 | Reply

    It seems like VCs just want to see “protectable IP” even if you company is a media play.

  2. By Al Corbin on Jul 4, 2021 | Reply

    But shouldn’t the investors be smart enough to know the difference between the real value and and the perceived value and make appropriate adjustments to the valuation?

  3. By Sunny Kalra on Jul 4, 2021 | Reply

    Al: The investors do make that distinctions, especially the savvy ones; but sometimes it takes time for the general investment community to realize the difference and make adjustments.

    Just to take the example of; the stock is at $9 right now. In past 52 weeks it has seen a high of $11 and a low of $3. Just before the patent announcement, the price was hovering at $4 or $5 or so.

    Chances that the stock price will settle down to $5 in a few months is very high. In a way, investors will allocate about $.50/share to the patent portfolio, which is still high, but not outrageously so.

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