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IP, IP Asset, Patent

Patent Analysts: The ‘Assistant Buyers’ For Your IP Licensing Store

When I read (and write) job listings for “Patent Analysts,” I become acutely aware that the phrase apparently means different things to different people.  One company that interviewed me a few years go said I was “overqualified” for its patent analysis position due to my law degree and patent litigation experience.  Another company said I was “underqualified” because I lacked their requisite 10 years of patent prosecution experience (and California bar admission).  The truth is, the work you get from an analyst will vary greatly depending on their background and experience.

Even within the relatively narrow field of IP licensing, the role of an analyst may be just as varied.  Consider, first, the basic structure of a patent monetization company whose goal is to invest money in IP rights and generate revenue by licensing those rights out to third parties.  Next, compare the monetization company to a typical retailer, whether it’s a department store, distributor, dealer or reseller.  The “IP rights” are analogous to the department stores merchandise, while the licensing revenue is analogous to sales.  Some IP rights will be purchased from their owners for cash–while others will be entrusted to the monetization company in exchange for a share of the licensing revenue–just as department store managers may choose to acquire merchandise for cash or credit, or sell merchandise on consignment.  Finally, monetization companies utilize licensing executives to interface and negotiate with companies regarding licensing arrangements in a process remarkably similar to a retail sales department.

So why would patent owners do business with a monetization company, rather than simply try to license the rights out themselves?  The same reason I only have to drive a mile to my local grocery store, instead of an hour to Paris, Texas to pick up a can of Campbell’s soup.  The monetization company acquired infrastructure, personnel and expertise aimed at getting the most value out of an available supply of IP rights.  If it makes the right decisions, the business will recover these upfront costs–and more–through licensing an ever-changing IP inventory.  Patent owners, on the other hand, might only have a few patents on hand, making the costs associated with acquiring their own expertise very difficult to recover.

So what does this all have to do with patent analysts?  For one thing, the deliverable you’ll receive after handing a patent to someone for “analysis” varies greatly depending on the analyst’s experience and frame of reference.  If your “analyst” is a technical expert–particularly one with little prior experience in patent enforcement–you’ll likely get a report detailing the technology described in the patent, and the value of any improvement the technology represents over the previous state of the art.  If your “analyst” is a patent attorney–particularly one with a lot of prosecution experience–you’ll likely get a report detailing the quality of the claims, the adequacy of the specification, and defects created by statements in the patent’s file history.

Any of this information may–or may not–be useful to you at some point.  However, if your goal is patent monetization, and analysis is your first step in the process, neither answer is particularly helpful and both are premature.  One patent might describe a way to extract 10 times as much energy from oil than we currently get, but if it expires in 10 years and the most advanced refineries in the world are still 15 years away from being able to implement the process, there’s no value from a monetization perspective.  Another patent might have the most precisely tuned, well drafted, well supported claims covering a combination pencil-sharpener/dog collar, but there’s still no value if no one wants to sell it.

The first thing any patent monetization company needs to know is whether anyone actually uses the technology covered by the patent claims.  Once you know the answer to that question, the question of how much effort to put into a deep legal and technical analysis becomes much easier to answer.  The solution, then, is to use patent analysts as ‘assistant buyers’ to support the decision-making process as new IP investment opportunities are presented.  Department stores routinely employ buyers and assistant buyers to acquire “the highest quality goods and services at the lowest possible cost.”  Monetization firms should utilize buyers in a similar way.  Over time, the assistant buyers (patent analysts) learn the process, including the difference in risk between cash purchases and consignment, the costs associated with selling (i.e. licensing) different kinds of technology, and, most importantly, how to understand and quantify licensing value.  Eventually, they may go on to become buyers themselves, or get interested in other aspects of the business, such as “sales,” but more on that later.

Since the licensing executives actually bring revenue to the business, the monetization company tends to value their skills and input above others in the organization.  In addition, since the licensing executives are de facto sales agents, their networking and “people” skills serve them well in learning of new IP investment opportunities. However, placing licensing executives solely in charge of acquisition decisions inevitably stunts the growth of the organization.  Those individuals are valuable, first and foremost, for their sales skills, not necessarily their analytical capabilities.  When deployed on the sales floor, they generate revenue for your organization.  However, when pulled off the floor and sent to a conference room to negotiate the purchase of next year’s inventory, they’re now removed from the process where they are most effective.  Even worse, potential buyers may feel neglected or unappreciated.

Obviously, selling a patent license is very different from selling a refrigerator. Unlike general merchandise, the monetization product is unique.  That said, a distracted sales agent still needs to invest additional time and resources to re-kindle the buyer’s interest.  Treating this cost as negligible eventually inhibits organizational growth and scalability, unless you tap into an infinite supply of equally skilled sales agents.  However, an organization can grow and scale in a more stable way by breaking up the purchasing and sales functions.

Should your top licensing executives have input into prospective purchasing deals? Absolutely.  After all, you promote them up the chain specifically because they have valuable knowledge and insight of the marketability of new IP.  But the responsibility to identify and acquire IP for new licensing programs should fall elsewhere. By splitting up these functions, the buyers can negotiate deals for incoming IP that provide the licensing executives with ample pricing options, thereby allowing the monetization organization as a whole to maximize profitability.  Each role player provides input throughout the process, but focuses on what they do best.

A successful, large-scale patent monetization company starts with the recognition of a process that attempts to get the most out of the finite quantity of time and energy under its employ.  By recognizing the differences between the buying and selling functions associated with monetization, a company can strategically place personnel into roles that maximize the effectiveness of everyone’s contribution, and simultaneously train future leaders of the business on the job.  Doing so creates a sustainable, scalable organization.

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