Google acquired Motorola’s patent pool of 17,000 patents for $12.5 billion in 2014! There were similar successive news articles capturing the spate of acquisitions undertaken by the pharma giant Takeda, where it acquired companies like Nycomed in 2011, URL Pharma in 2012, Multilaba in 2012, Ariad Pharma in 2017 and Tigenix in 2018, with an objective to boost its own patent portfolio and in turn to strengthen its position in the global pharma market. Information like these only reaffirm that value of an organization lies in the Intellectual Property it owns and more importantly in the patent portfolios owned and maintained by the organization. Therefore, in today’s era of extreme competition and disruptive market conditions, it is of utmost importance that companies carefully and strategically handle their ‘patent portfolios’ and pay attention to factors other than just increasing the numbers. These factors can be qualitative as well as quantitative in nature such as number of patents, variety or diversity in the portfolio, active portions of portfolio vis-à-vis the timing of product entry/exit in the market, etc., however, each factor needs to be given careful attention, if a promising patent portfolio capable of delivering maximum returns is to be achieved.

While the article is intended to discuss at length various important factors like volume, diversity, audit, cost-profit balance check, etc., that lead to a winning portfolio, the most crucial factor in achieving the same revolves around the risk parameters and how strategically is the risk spread across the patent portfolio. The old rule of ‘avoiding to put all eggs in one basket’ applies equally in the context of patent portfolios also. If an organization’s market leadership depends only on one product covered by one patent, the success of such an organization is limited to the life-term, validity, scope, and strength of that one single patent. The minute the patent is in the public domain, the market position of the company will automatically get diluted within no time. Similarly, it provides an easy opportunity to the competitors to disrupt the business process/cash-flow of an organization by simply contesting the one single patent of the organization, who would willingly and obviously divert all its attention and resources in saving said crucial patent.

Besides the risk involved with depending on a single or hand full of patents, it is imperative for organizations to have a spread across various product lines/technologies covered by various patents so that the profitability of the organization is not majorly affected by market shifts and disruptive technologies. To this end, it must be understood that creating and maintaining variety or diversity in a patent portfolio can be the easiest tool for risk evasion, as dealt briefly in the paragraphs above. These factors

provide a complementary advantage to the size and volume of the patent portfolio; however, one cannot replace the other. While a number of patents can help in achieving market leadership, diversity and variety helps in minimizing the risks and both together increases straight forward profitability. The variety in a patent portfolio is governed by business strategies which in turn will take several factors into consideration like market trends, jurisdictions, social-economic classes being served, expansion decision, survival needs, investment capital available, etc.

Size of the patent portfolio also serves as an important yardstick for measuring company’s profitability, however, considering that patenting is relatively a costlier affair, patenting every idea may not be the best strategy for every organization. This factor certainly needs a regular and judicious check-n-balance scrutiny so that an optimum patent portfolio size is maintained at any given instance for an organization. Needless to mention, there is no standard ‘optimum size’ for patent portfolios and the same will depend on the R&D investments of the company, types, and reasons of acquisitions made by the company, its position in the industry andthe overall business strategy being defensive or offensive. For instance, a broad patent coverage on all aspects of any subject matter/product may be helpful in ensuring market leadership and for deterring other market entrants, for an organization that employs defensive business strategies. Even for companies with offensive strategies, a huge portfolio creates opportunities to influence the industry, get additional leverage during licensing negotiations, create de-facto standardization, etc.

Next, even though the size of the portfolio comes with several advantages, the same should not outrun the quality parameter of the portfolio which is equally important for market leadership. Also, identification of the patents that affirms the quality of the portfolio crucial to any business as these patents are the ones that will be used during enforcement, litigation, licensing negotiations, etc. while the remaining patents will serve the purpose to deter small level competitors and creating patent thickets around the profitable products. Obviously, as the size of the portfolio increases, the quality of an

Individual patent becomes less important since both risk and profit gets leveled-out in larger portfolios. Summing it up, a careful assessment of profitability and risk derived from having one patent per technology versus having several patents per technology versus having few patents in all technologies, and the results thereof, should govern the ‘optimum size’ of the patent portfolio.

Finally, a robust IP audit policy needs to be in place to govern that appropriate checks-nbalances on each of the factors discussed above are applied regularly and efficiently. For instance, regular audit to discount the weak patents or the patents covering dead technologies, from the portfolio can help in achieving substantial cost saving making the patent portfolio profitable. Similarly, creating patent thickets in demanding market areas can create market leadership and standardization opportunities. Investment policy for expedited grant of patents in emerging technologies or disruptive technologies may be helpful in maintaining the pace and position in the market since the new entrants may not be able to afford the additional expenditure needed for expedited prosecution procedures. Identifying which patents to discount, which ones to continue, which ones to improvise and which ones to revive, is the key to keep the patent portfolio abreast, optimized and profitable at any given time.

To conclude, a number of patents, quality of the portfolio, a variety of technologies covered in a portfolio are crucial factors governing risk and profitability of any organization. A well-strategized IP protection and enforcement plan governing the aforementioned factors is all that can achieve a ‘Profitable Patent portfolio.