Will a Recession Impact the Patent Industry?
by Tyron Stading on October 09, 2008
With the US and international markets in turmoil, everyone is focused on the economy. The Dow and the NASDAQ have experienced historic drops, and many people may be concerned about which industries will grow or contract, and what that means for their job.
Given the economic conditions, what will happen to the IP and Patent industries? The short answer is that there is good and bad news.
First, the good news. Historically speaking, in recessions the US patent filing and IP litigation markets have experienced significant growth. While I have not found an academic explanation for this, let me attempt to explain my personal view. When money becomes tight, companies look for alternatives to increase their cash flow and find two paths: 1) product innovation, and 2) litigation. For product innovation, this means creating indispensable products that people can’t live without, meaning you need to increase R&D and also to protect your innovations. For litigation, companies try to enforce their IP rights to protect their product revenues by asserting their patent positions. No matter what the reason, patent activity (litigation, innovation, etc) only surges in response to a recession.
The following chart illustrates the IP and Patent Litigation over the last 40+ years in the context of 3 documented recessions. As you will see in the chart, recessions caused increased growth in the patent and IP litigation. Over the course of 3 years following a recession, there was an average 30% increase in activity across three different periods. While leading up to the recession there was only slight growth, the was never really a dip in patent litigation.
To further this point, we can also look at the number of patents filed during those same periods of recession. The following chart shows similar increases in response to recession. On average, patent filing activity increase 10-11% across the three recession periods.
Now for the bad news. The flip side of this increase is that companies may be facing increasing litigation costs as they defend their products and market positions. With a statistical increase in litigation activity, there is a strong likelihood more companies will be sued over patent infringement. This may be especially difficult with the increases in patent troll activities. As I’ve mentioned in previous posts, companies are already seeing more infringement letters than ever before.
So what is the outcome? What does this mean to you?
First, I think companies need to look to innovation as the key to increasing margins and maintaining market presence. Without innovation, companies will have decreased sustainability and will be susceptible to competitors undercutting them on costs and beating them on functionality. As part of innovation, this also means looking for good deals in the IP world. Tons of good patents are available for licensing and can accelerate your development if you know where to look.
Second, I think companies need to be more vigilant and structured in their litigation defense and strategy activities. With increased litigation, you have to become a very unattractive target for litigation. Being able to respond quickly and intelligently to threats/infringement will immediately dissuade would-be litigators. Furthermore, many of your competitors may try to copy or steal your products in an attempt to increase revenues. The only way to prevent this is to constantly monitor and track your competition. You can either be the victim or the savior when IP theft strikes, so understanding the competitive landscape becomes even more important for litigation and competitive product activities.
While these are difficult economic times, companies can come out ahead if they take advantage of these historical trends. One thing is certain: the patent industry will continue to be strong and grow. The only question is whether you take advantage of that growth or not.
Sources:
University of Houston Patent Statistics
NBER Business Cycle Expansions and Contractions
USPTO Filing Stats
Correlating Patents with Litigation Data to Determine Legal Risk
by Ryan Rozich on October 01, 2008
Rather than looking at different information sources in isolation, one of our guiding philosophies is that the answers to many business level questions are found at the intersection of different types of data. So what does this mean from the perspective of someone looking to do real-world analysis? Let’s use correlated information to examine the litigation risk involved in a certain technology landscape.
Imagine we are a company that either (a) makes tooth whitening products, (b) is looking to start a new business unit in this area or (c) is considering acquiring another company in this area. One thing that we may want to consider is the risk of IP litigation – in which technology areas and from which companies. Simply searching patent data will tell us how many patents are in this area and possibly who owns them. Searching litigation cases is not much help without putting those cases in the context of which patents or technology areas are at issue. By correlating the patents to the litigation cases we can do advanced analysis around which technology are most heavily litigated, who the top plaintiffs are, who is being sued most often and which patents are at issue more than others.
Using Innography we perform a simple search for ‘tooth whitening’ and return a set of results for the patents that match this query. Then we may want to know which of the technology areas are most heavily litigated; we can see that patents involving using light to cure a whitening composition – and the composition itself – are litigated more often than tooth bleaching trays. We also see that the top litigating companies are Ivoclar Vivadent, P&G and Dental Concepts, and that some patents are litigated disproportionally more than others. We can then correlate the litigation parties with financial data to discover which are the large companies and which are the small or unknown litigators. Finally, we can correlate and pivot on many different dimensions of this data to do decision tree-like analysis to determine the risk factors and how we could mitigate risk to aid in making our decisions.
All of this analysis is possible only when we have patent, litigation and financial data available in a format that is able to be analyzed in context of each other rather than in isolation.
Why the User Interface will Drive Innovation in Patent Research
by Tyron Stading on September 15, 2008
I remember the first time I opened a web browser back in 1994 and thought this was going to change the way we do things. This turned out to be a understatement as search engines have now indexed billions of patents. The web has been so successful that people now have TOO much information and need to put it all together. To compensate, companies over the last 14 years have continually refined user interfaces and visualizations to make information easier to understand. There have been at least a dozen iterations on user interfaces and designs, and it is still a work in progress.
I am going on record that user interface design will be a driving force for innovation in the patent intelligence/research space. Just like the internet, patent researchers face the same problem of too much information. In 2007 the US patent office alone had a backlog of over 750,000 patent applications, and in 2008 expects to have over 500,000 new patent applications filed. However, the patent industry has stopped following the path of improved user interfaces. Somewhere around 2001, the patent industry stopped trying to improve the user interface and gave up while the search industry continued to innovate. I predict that in the next few years the patent industry will catch up with the search industry and bring some revolutionary ideas to the table.
The goal is to make the data work for the user to support their job, and not the other way around.
Here is an example to illustrate the evolution of the user interface:
Today, most systems are in IP Search 1.0, where it is just a table list that requires browsing through thousands of results. The user has to make the data work for them, but is required to modify it significantly.
Generation 1
More creative systems are leveraging navigation and visualizations to help users find information quicker and get to the answer faster. It reinforces the information they are looking for, finding hidden companies or information that is immediately relevant and useful.
Generation 2
Going forward, the user interface that will drive change will reinforce what the user is trying to achieve. It will integrate with their daily research process, track information in a way that makes sense and can be used to communicate a point. The interface should be presentable to others and immediately make a point.
Generation 3
As more information becomes available, we will see more creative and integrated ways to utilize this information to reinforce people’s jobs. It is a very difficult challenge, but we at Innography are dedicated to making an impact in user interface design for patents.
Please use this blog to post ideas or suggestions for UI design. Help us revolutionize Patent Intelligence!
Simplify Your Search
by Roji John on September 02, 2008
Three Rules of Work: Out of clutter find simplicity; From discord find harmony; In the middle of difficulty lies opportunity. --Albert Einstein
One of the things I’m constantly asked about is the specifics of our search capability. I’ll often run down the list, from the common to the more obscure. Overall, the response to our breadth of options has been very positive.
I’ve even gotten involved with porting some of the queries from different engines to ours. This can be a dizzying experience. The level of complexity in some of these queries is amazing.
For the more involved case (and even for the simple one) it’s good to take a step back and focus on the goal of the project. Often the questions are much more mundane than the queries. What’s happened is that the user has been forced over time to modify the query to get a relevant data set. This caused a morphing of what was once probably something very simple and clear. Some users are so used to this that they can write (and even think) in this complex boolean logic.
The answer is usually not in directly porting the boolean logic to our system. By understanding the goal, the options available with Innography can often rescue us from this unnecessary complexity.
Being in the right vicinity is the most important part of the answer. I lightly touched on the advantages of the patent classification system in my last blog post. The classification system is one of the vicinities. By limiting your search space to relevant technologies and applications, your query can be simplified to more easily capture the relevant data.
There are other vicinities. A list of competitors, a date range, or even inventors can all be vicinities. Even business information such as revenues or the amount of litigation might give you a vicinity. It all depends on the final goal.
The filters available on the left side of any result set are how you can get to the right vicinity. I’ve been able to assist our users in transforming complicated, hierarchical boolean logic down to just a few plain keywords with a few filters. When that happens, even I can understand what’s being searched.
The added advantage to simplified search is that our users are able to easily modify it to get immediate insights. This changes the game. It makes the search process about insights rather than data retrieval. Pushing the insights into the search process gives our users the power to make decisions during the research rather than as a result of it. It might take a little while to get used to this process, but once implemented our users find it invaluable.
