patent citation and the economic value of a patent gerald j. siuta, ph.d. president siuta...

Patent Citation and the Economic Patent Citation and the Economic Value of a PatentValue of a Patent

Gerald J. Siuta, Ph.D.Gerald J. Siuta, Ph.D.PresidentPresident

Siuta Consulting, Inc.Siuta Consulting, Inc.(www.siutaconsulting.com)(www.siutaconsulting.com)

Workshop on Competitiveness of Technology Workshop on Competitiveness of Technology Innovation and Research AchievementsInnovation and Research Achievements

Taipei, TaiwanTaipei, TaiwanSeptember 22, 2004September 22, 2004

Presentation OutlinePresentation Outline

• Patent and Licensing StatisticsPatent and Licensing Statistics• AUTM 2002 Licensing SurveyAUTM 2002 Licensing Survey

• Patent CitationPatent Citation• How can it assist in patent valuationHow can it assist in patent valuation

• Economic Value of a Patent Economic Value of a Patent • Technology ValuationTechnology Valuation• Financial Value of a PatentFinancial Value of a Patent

Siuta Consulting, Inc.

Why file a patent application?Why file a patent application?


Academic Technology Transfer in Academic Technology Transfer in North America 1991-2002North America 1991-2002


AUTM Licensing Survey: FY2002

19911991 19961996 20022002

U.S. Patent U.S. Patent Applications FiledApplications Filed

16431643 32613261 77417741

License and Option License and Option Agreements SignedAgreements Signed

12781278 27412741 46734673

What is a Patent?What is a Patent?


Common misconception: Common misconception:

A patent provides the inventorA patent provides the inventor

the right to make, use and sellthe right to make, use and sell

the inventionthe invention


A patent for an invention is the grant of A patent for an invention is the grant of a property right to the inventor(s). The a property right to the inventor(s). The

right conferred by the patent grant is right conferred by the patent grant is “the right to exclude others from “the right to exclude others from

making, using, offering for sale, or making, using, offering for sale, or selling” the invention in the United selling” the invention in the United States or “importing” the invention States or “importing” the invention

into the United Statesinto the United States

Siuta Consulting, Inc.United States Patent and Trademark Office 2004United States Patent and Trademark Office 2004

What is patent citation?What is patent citation?


Patent CitationPatent Citation

• Also called a “Patent Reference” Also called a “Patent Reference” • A list of earlier issued patents that appears in A list of earlier issued patents that appears in

the citing patent when it issuesthe citing patent when it issues• Considered to be the most relevant prior art Considered to be the most relevant prior art

upon which the citing patent is basedupon which the citing patent is based• Establishes novelty of the citing patentEstablishes novelty of the citing patent• Assesses impact of the technologyAssesses impact of the technology


When Citing Another PatentWhen Citing Another Patent

• References previous patents in the same References previous patents in the same technological area as the citing patenttechnological area as the citing patent

• The cited patents represent the most relevant The cited patents represent the most relevant prior art to the inventionprior art to the invention

• Provides a view of previous technology that Provides a view of previous technology that forms the basis for the citing invention forms the basis for the citing invention

• The cited company may be a potential The cited company may be a potential licensing partnerlicensing partner


When a Patent is CitedWhen a Patent is Cited

• The citing patent is related to the cited patent The citing patent is related to the cited patent with respect to the subject matterwith respect to the subject matter• Citation may indicate patent infringementCitation may indicate patent infringement

• Establishes the cited patent’s impact on Establishes the cited patent’s impact on subsequent inventionssubsequent inventions

• Highly cited patents are considered to be more Highly cited patents are considered to be more valuable valuable

• High valuation is placed on companies that High valuation is placed on companies that hold very highly cited patentshold very highly cited patents


Patent Citation ServicesPatent Citation Services

• Derwent Patent Citation IndexDerwent Patent Citation Index• library.dialog.com/bluesheets/html/bl0342.html library.dialog.com/bluesheets/html/bl0342.html

• Metrics Group (EKMS, Inc.)Metrics Group (EKMS, Inc.)• www.patentcitations.comwww.patentcitations.com

• Mogee Research & Analysis, LLCMogee Research & Analysis, LLC• www.mogee.com/profile/profile.htmlwww.mogee.com/profile/profile.html

• Wisdomain, Inc.Wisdomain, Inc.• www.wisdomain.com/CitationModule.htmwww.wisdomain.com/CitationModule.htm


Patent citation provides a Patent citation provides a

means to determine the means to determine the

value of an issued patentvalue of an issued patent


Economic Value of PatentEconomic Value of Patent

• Confers the right to prohibit others from Confers the right to prohibit others from making, using and selling the inventionmaking, using and selling the invention

• Protects an investment in the inventionProtects an investment in the invention• A company is more inclined to develop a A company is more inclined to develop a

product with the assurance of being able to product with the assurance of being able to prevent others from using the inventionprevent others from using the invention

• Limits the risk of developing new products Limits the risk of developing new products by guaranteeing the patent holder a by guaranteeing the patent holder a competition-free head start to make a profitcompetition-free head start to make a profit


A patent (or patent application)A patent (or patent application)

has little economic value unless has little economic value unless

a company is willing to invest a company is willing to invest

in the commercial exploitation in the commercial exploitation

of the technologyof the technology


Since most technologies are Since most technologies are licensed and/or start being licensed and/or start being developed long before the developed long before the

patent issues, patent citation patent issues, patent citation provides limited utility in provides limited utility in determining the value of a determining the value of a

novel technologynovel technology


Therefore, the key is Therefore, the key is

the value of the technologythe value of the technology


Technology ValuationTechnology Valuation

• What is the technologyWhat is the technology• How will it be usedHow will it be used• Is there a potential productIs there a potential product

• Is the product novelIs the product novel• An improvement to a marketed productAn improvement to a marketed product• Is there a market for such a productIs there a market for such a product• What are the competitive productsWhat are the competitive products• Time and cost to develop the productTime and cost to develop the product


Is there a formula to Is there a formula to

determine the financial value determine the financial value

of a patent?of a patent?


Value of a PatentValue of a Patent

• License Term:License Term:• The obligation to pay royalties with respect to net The obligation to pay royalties with respect to net

sales of the Product shall commence on the sales of the Product shall commence on the Effective Date of the License Agreement and Effective Date of the License Agreement and continue until the later of (a) expiration of the continue until the later of (a) expiration of the last to expire patent covering such Product or (b) last to expire patent covering such Product or (b) a period of ten (10) years from the date of first a period of ten (10) years from the date of first commercial sale of such Product commercial sale of such Product


Value of a Patent (continued)Value of a Patent (continued)

• Royalty on Net Sales:Royalty on Net Sales:• In any country where a patent application does In any country where a patent application does

not issue, the royalty rate due to the Licensor will not issue, the royalty rate due to the Licensor will be reduced by one-half on net sales of each be reduced by one-half on net sales of each Product that is marketed by the Licensee or any Product that is marketed by the Licensee or any of its sublicensees and payable for ten (10) years of its sublicensees and payable for ten (10) years from the date of first commercial sale of such from the date of first commercial sale of such Product.Product.


Pitfalls to AvoidPitfalls to Avoid

• Pursue licensing before technology is Pursue licensing before technology is sufficiently developedsufficiently developed

• Publish before filing patent applicationsPublish before filing patent applications• File patent applications too earlyFile patent applications too early• Fail to file patent applications worldwideFail to file patent applications worldwide• Mistake new use for new productMistake new use for new product• Overestimate the valueOverestimate the value


It’s not the patent, It’s not the patent,

but rather the technology but rather the technology

that has the real valuethat has the real value


patent citation and the economic value of a patent gerald j. siuta, ph.d. president siuta...

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