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Unlocking Patents' Hidden Value

April 22, 2015
The U.S. patent system has been "weaponized" through excessive litigation. A new company promises to use Big Data to open up the system and promote innovation.

Ask anyone in manufacturing today for the first word that comes to mind when they hear the word “patents,” and almost certainly the response will be “litigation.”

Litigation – not invention, not opportunity, not competitive solutions.

Think about what that means. A patent system that is supposed to promote progress no longer appears to be doing so. It’s been weaponized. Most companies rightly or wrongly no longer view patents as rich depositories of new technical knowledge that can be applied to improving their own products and services.

It is no wonder, then, that “ending abusive litigation” has become an early focus of Congress this year. This is a worthy goal. But for the American economy to remain globally competitive, — and for businesses to access innovation efficiently to create increased commercial and social value — the focus on patents must not stop at the problem of abusive litigation.

Don’t get me wrong. Abuses are real and they matter. But the unspoken reality is that America’s innovation eco-system faces a far greater problem than abusive litigation. And until this reality is addressed, particularly by those who need to make their products faster, better and cheaper, we will not achieve the goal of innovation leading to increased productivity, business competitiveness, stronger economic growth and better and higher paying American jobs.

Today, only a small percentage of all patents issued, less than 5%, are ever licensed.  The rest, over 95% of all patented discoveries, are never put to use to create new products and services, new jobs and additional economic growth.  That’s right, 95% of issued patents are frozen completely out of the commercial marketplace and fail to contribute to increased innovation.

[B]ecause patent licensing is built upon a system that requires a lawsuit to determine what a patent covers or doesn’t cover, only the most valuable patents ever get licensed.
—Jay Walker

This is not to say that all patented discoveries have economic value. But because patent licensing is built upon a system that requires a lawsuit to determine what a patent covers or doesn’t cover, only the most valuable patents ever get licensed. Litigating patents is just too expensive for most owners or users of patents, particularly the vast majority of mid-sized businesses, most of which, even if they are not tech companies, need access to a steady source of cutting-edge technology in an economy dominated by technology and lightning fast iteration cycles. 

Licensing issues aside, looking at the value of patents through the keyhole of the legal system misses their far deeper value.  Each patent serves as an advertisement for a deeper set of innovation assets that include specialized experts, technical knowledge, trade secrets and technologies.  These deeper assets are where valuable solutions can be found.  For example, the most important information in a patent may be the inventor who has a demonstrated technical expertise in an area of need for another company.  Think of the patent itself as the part of the iceberg that is visible above the water line whereas most of the iceberg is invisible below. The ability to survey and analyze the entire iceberg can be a difference maker for American businesses. 

Revitalizing the Patent System with Big Data

These realities are why I have spent the last two years developing an entirely new way for businesses to solve their toughest problems, to find the experts and solutions they need but could never have found; the needles that matter in the world’s $5 trillion R&D haystack.

So last month, with a list of initial subscribers spanning the breadth of American enterprise, my company launched a voluntary market-based system called the United States Patent Utility that provides a way for companies of all sizes and sectors to obtain the information and identify the talent necessary for competitive success. It does this by employing a Big Data-driven system to do a statistical analysis of each subscribing company’s product lines and matching these to the ideas, people and organizations otherwise hidden in the sea of external innovation, be it the U.S. patent database or publicly available technology publications.

Large corporations for years have understood that a go-it alone R&D strategy is both expensive and ineffective.  When he became CEO at Proctor & Gamble, A.G. Lafley made it a goal that 50 percent of P&G’s product and process innovation come from external sources. P&G had 7,500 people devoted to R&D.  But as noted in a 2006 Harvard Business Review article by P&G executives Larry Huston and Nabil Sakkab,  “for every P&G researcher there were 200 scientists and engineers elsewhere in the world who were just as good – a total of perhaps 1.5 million people whose talents we could potentially use.”  Companies today not in the Fortune 500 face the same challenge of accessing information, innovation and expertise; they just have not had, here to fore, a way to afford an innovation strategy.

Each of The Utility’s initial customers has one thing in common.  They recognize that today’s information economy rewards those organizations that can access and use the best information, the most current technologies, and the right experts. With the power of Big Data growing each day to disrupt outmoded ways of doing business, I believe the private sector can de-weaponize the patent system, revitalize its mission of promoting innovation, and help American companies and innovators better serve our nation’s economic future.  It’s about time we innovate the way we do innovation.

Jay Walker is the founder of and the world’s 11th ranked living holder of patents. He serves as executive chairman of Patent Properties, Inc. which recently launched The United States Patent Utility.

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