Three root causes why most patents never generate a Nickel of revenue (article 3 of 5)

The Need for a Plan to Succeed AFTER the Patent Office

In this series, I have been sharing my observations about 3 specific root causes of patent failure that arise from a poor patent process.  In the final installment of this series, I will propose a complete systematic patent process that I have found to be the best way to eliminate all three of these root causes of patent failure, while (i) improving profit potential and (ii) saving time and money to boot!   

In the first article in this series, I contended that a poor patent process is the failure mode that accounts for why so many million dollar ideas, no matter how brilliant the idea or ripe the market, nevertheless fail to generate a dime of revenue for the patent owner.  In the second article, I exposed the “office action churn” process as a boom for patent firms but a bust for their clients.   

The root cause for that bust occurs when attorneys fail to draft the patent application with a plan for success in the patent office.  

This article exposes the second root cause of patents not generating a dime of revenue:  

Attorneys that fail to draft the patent application with a plan for success AFTER the patent office. 

Root Cause #2: No Plan to Succeed After PTO 

Would you invest in a patent if you knew it would never make a dime of revenue?  

Most business people would say no. Unfortunately, most attorneys never ask them that question. 

So I asked,  

“How can we help clients think through the prospects for making a return if they get a patent so that the CLIENT is, usually for the FIRST TIME EVER, finally empowered to make an information-based decision about whether and how much to invest in a patent?”   

It seemed clear to me that a patent that is successful in the patent office is no success if it fails to cover something that is sufficiently valuable in the marketplace.     

When The Juice Is Not Worth The Squeeze

So how valuable is “sufficiently valuable?”

One simple, cut-through-the-clutter answer is the following:

If you can’t come up with a most-likely business case in which the lifetime additional profit from having a patent will exceed around $3MM over about 15 years of patent term, then the litigation costs are about on par with the lifetime profit, and competitors may take the chance that you won’t bother to spend 3 dollars to (maybe) get back 2.

Stated differently, if you don’t expect a patent to add around $3MM (e.g., around $200K in profit per year for 15 years) to your bottom line, then expect that legal fees could eat up most of what you might recover in a (successful) patent lawsuit. Patent lawsuits are both risky and spendy, and infringers know this.

So, in a low end market, with less than a couple million dollars at stake, the juice you might get from the lawsuit might not be worth the squeeze.

The “Commercially Valuable Chokepoint” is Born 

In order to help clients figure out whether their idea is commercially valuable enough to warrant patent protection, I developed the concept of a commercially valuable chokepoint.  Long story that I will save for another day.  

If you would like to know more about the commercially valuable chokepoint and how you can use it to make better patent investment decisions, please contact my office and we can discuss your situation.

The Underlying Root Cause

The biggest “avoidable” reason patents succeed in the patent office and still fail to generate a dime of revenue originates when the attorney begins a draft patent application without any knowledge about business plans for using the patent to generate revenue.   

This is a big topic that I cover in my book and with clients.   

What is tragic to me is to see so many patents that fail to generate a big return on a great invention simply because they were started and filed without sufficient attention to the fact that a patent is intended to be a valuable, revenue-enhancing business asset.   

When that happens, I call it having “no plan to succeed after the Patent Office.”   

That is what can happen when there is a rush to file a patent without thinking strategically about how to construct a patent to become an incredibly valuable business asset.

Bottom Line for Business

Patents should be treated as highly valuable business assets, but only if they can actually protect more revenue than the cost to enforce in a pricey patent litigation.   

Patents that don’t protect a threshold amount of profit are not particularly desirable.  But patents that can protect more than the cost of enforcement can be extremely valuable.   

So if you invest in patents, I would consider buying fewer but investing more in the good ones to make sure they are litigation quality patents… “because litigation quality patents generate more revenue, faster!”®  

If you would like to discuss how to position your business to plan for success after the Patent Office, call my office at (512) 649-1046

Have a profitable day!