This post was contributed by Mark Sajewycz, Partner, Norton Rose Canada LLP
The market has recently begun to better appreciate the value of patents, particularly after Rockstar Bidco, LP, a consortium comprising tech giants Apple, Microsoft, RIM, EMCand Ericsson, acquired Nortel’s patents for the staggering sum of $4.5 billion.
Recent innovations in the computer and wireless technology sectors have focused on creating the next disruptive technology. Many companies developing these technologies are at a fairly early stage and fuelled by private investment and government funding.
Unfortunately, this funding is drying up, leaving these businesses vulnerable to failure. As with Nortel, this creates an opportunity for financially healthy businesses to acquire patent assets of failing or failed businesses at bargain prices.
The attraction of such patents is they may cover important aspects of a disruptive technology, thus provide a monopoly over a potentially significant market.
Acquiring patents from troubled companies should be well thought out. For each patent, it is important to understand the scope of protection afforded by the claims, whether such patent scope covers meaningful technology that will provide commercial advantages, the remaining duration of patent term, and the validity of the claimed subject matter.
For pending applications, final decisions on patentability may not have been made. This means you must understand the technology space, the pre-existing technologies, and assess whether the claimed subject matter is patentable over such pre-existing technologies.
You still may be able to improve the quality of patent rights if patent protection is not optimal —there is greater flexibility with pending applications to optimize claim scope or correct other defects than there is with issued patents.
Even if defects can’t be corrected, the opportunity may still exist to “re-file” (strictly speaking, this would be a completely new patent application filing) the same invention with a higher quality patent application.
Where jurisdictional gaps in patent protection exist, you could file patent applications in jurisdictions missed during the initial wave of patent filing by the original owner. Also, there may be features for which patent applications have yet to be filed and the filing opportunity still exists. It may be helpful to identify and include such technologies in the application.
For financially troubled companies, it should not be surprising that claims aren’t optimal or other patent protection defects are present. Such companies typically conserve their cash and reduce spending on patent-related expenses, potentially resulting in compromised patent quality.
However, by thoroughly investigating the patent assets being purchased, the likelihood of overpaying or making a bad purchase is greatly reduced. If the acquisition is completed, you will also be aware of any actions to take to improve patent asset quality.