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Is it Patentable?
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   Patenting...any economic rules of thumb?
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warrendekker
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Patenting...any economic rules of thumb?
« on: Dec 13th, 2005, 7:09am »
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I've read a lot, in books and on forums like this, on the rules of patentability....non-obviousness, etc.
 
But are there rules of thumb on the financial end of things?  Considering how much it costs to obtain a patent (four or five digit figure?), and how much it costs to defend a patent against infringement (five digit figure plus?)...are there rules of thumb on potential sales/profits on an item, and whether it makes economic sense to get a patent (versus just building the dang thing without).
 
Thanks,
 
Warren
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JimIvey
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Re: Patenting...any economic rules of thumb?
« Reply #1 on: Dec 13th, 2005, 8:58am »
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Generally, no.  Each patent is very unique (by definition) and covers something completely different than all other patents.  The markets affected are just to wide and varied.
 
Having said that, I do know something about the market on which patents are bought and sold -- particularly for computer technology.  I forget the exact number, but there's a no-brainer number at which some people buy patents relevant to their industry without worrying about due-diligence, validity, etc. -- somewhere around $20,000-30,000.  Something less than that is the no-brainer price for an application meeting the same criteria.
 
In this market sector, the cost reflects about what it would cost to get the same IP (patent or application).  So, either the idea is valued at $0 or the work to get the application/patent is heavily discounted.
 
I understand that the highest companies are willing to pay for a patent is about $1million, and that's extremely rare.  Yes, there are patent awards in the half-billion neighborhood, but those are very rare and the thinking is that most patent owners can't bear the $2-3million to sue in court and will accept $30million to settle, even after winning, just to avoid delays and appeals.
 
That sort of jumps ahead of your question -- the market folds in all the things you mention and comes up with a price.  Maybe not the right price, but the price that the best experts in the industry can come up with.
 
Here are some specifics answers to your more detailed questions.
 
Cost to obtain a patent:  years ago I heard a number of about $15,000-25,000 from filing to issuance over a 3-5-year period.  For some cases, that number can be consumed by filing only.  For others, you can perhaps have a patent in hand for less than $10,000 -- maybe as little as $6,000 for a fairly simple invention ($5,000 to file) and allowance as the first Office Action (no back-and-forth with the Office).
 
Enforcement:  I'm looking into this right now for a client.  Expect at least $2-3million (or the help of a lot of people working on contingency) and about 3-4 years to "first money."  If your goal is to fire back at someone suing you for infringement of their patents, you might do better -- a quicker settlement for less money.
 
Potential sales/profits -- sorry, I have no idea.  Look for similar products in similar markets.  Make conservative/pessimistic assumptions.
 
Patenting vs. just making the dang thing:  You can forego patents.  If you make significant money, you can expect other patentees to find you and hold their hand out.  If they're competitors, you're going to wish you had your own patents to assert back and reduce your liability (Intel once bought one patent and cross-asserted it to reduce their liability from 9 figures to 7 figures -- great deal!).  If they're independent asserters (people like you, without a product/business around the technology), having your own patents won't help.  But you can do what others do, don't talk to them until they sue (easiest way to sift the serious asserters from the others, but risks extra liability for "willful infringement").
 
You can start out just making the dang thing and later worry about patents.  The downside there is that your earliest work is likely to be the most general and support the broadest patents.  Later work will tend to be specific improvements (not necessarily less valuable, but more narrow).
 
I hope that helps.
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James D. Ivey
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Re: Patenting...any economic rules of thumb?
« Reply #2 on: Dec 13th, 2005, 9:01am »
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I don’t have a quick rule of thumb, but you might want to consider modeling various scenarios to determine if the cost and effort to obtain a patent makes sense for your business.  I suggest outlining several scenarios of how your business venture may develop with or without you having applied for patents.
 
Your models need not be particularly sophisticated.  You might not even need a spreadsheet.  Consider several paths that your business is likely to follow over the next several years in the absence of patent protection.  Some of the variables will be closely related to your business, and some will be extrinsic to the business and more related to economic or social trends.  Some of the models will show your business succeeding, some will end in failure.
 
Then go back and reconsider each of those scenarios if you had (i) applied for, but not been granted a patent; (ii) applied for and received a patent; and (iii) applied for and received a patent, and identified an infringer.
 
This process is not a quick and easy way to decide if you want to go for a patent.  But before you commit a lot of time, effort, and money into a business venture, you should have a good idea of the likely outcomes.
 
Good luck,
 
 
Richard Tanzer
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Richard Tanzer
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JimIvey
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  jamesdivey  
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Re: Patenting...any economic rules of thumb?
« Reply #3 on: Dec 13th, 2005, 11:01am »
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Apropos the original poster's question:
This news posting.
 
Regards.
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warrendekker
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Re: Patenting...any economic rules of thumb?
« Reply #4 on: Dec 31st, 2005, 12:28pm »
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on Dec 13th, 2005, 8:58am, JimIvey wrote:

 
 
Patenting vs. just making the dang thing:  You can forego patents.  If you make significant money, you can expect other patentees to find you and hold their hand out.  

 
 
I was re-reading this thread, and had a question, Jim.  Are there ways of protecting oneself against this (...expect other patentees to find you and hold their hand out....), apart from getting a patent?  I guess I am not sure what "assert back" means.
 
 
Warren
 
 
 
 
 
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