Friday, August 26, 2011

Googlerola emphasizes importance of strong patent portfolios

Google's $12.5 billion bid for Motorola Mobility, at a 63% premium, is generally thought to be about using Motorola's large patent portfolio to help protect Android and Google's other mobile communications interests.  The deal has renewed debate on the weaknesses of our patent system and generated some interesting discussion about Google's plans.  It also emphasizes the reality that today, meaningful patent portfolios are still critical to business.

One would think that Google would have developed a much larger portfolio of its own.  The company has generally had a long term view, is indeed very innovative and has plenty of talented engineers, product managers and lawyers to write patent applications.  The reality, however, is that creating in-house patent development programs is challenging.  There are many reasons for this but a primary issue is simple - since time spent on patents doesn't necessarily turn into extra revenue until years later, patent work can be hard for young companies to prioritize.

So how does a company start a serious patent program that increases its valuation?  There are a few simple steps most any company can take.

All company stakeholders need to recognize the value of intellectual property and regularly review metrics.  Examples of such metrics include number of applications filed per quarter and competitor comparisons. Patents are probably the most objective measure of technological innovation, and yet often take a back seat at many board meetings to a deep dive on short term financials and sales data.  Management, board members and shareholders of technology companies, having seen the valuation premium paid for Motorola's portfolio, should all expect measurable productivity from their teams in this regard.

In addition, have one point person ultimately responsible for developing a patent strategy.  Whether this person is the company's Chief Technology Officer, VP Marketing, General Counsel or has some other role such as a VP of Intellectual Property, having one owner is much more likely to create accountability, clear goals and success.  Committees can be helpful, but identifying a leader will help tremendously.

Finally, create company-wide incentives for, and recognition of, inventors. Simple incentives such as cash bonuses are a sure way to increase productivity in patent programs.   Give, as an example, $1,500 per named inventor for granted patents and watch the number of patent applications increase rapidly.  I also like awarding plaques and certificates to inventors as recognition for their innovation.

These building blocks can help you establish your own successful patent program.  And developing a deep patent portfolio can help a technology company create significant enterprise value while protecting core assets.       

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