Everything You Need to Know
About Patents

Patents provide temporary exclusivity, granting the right to exclude others from making, using, selling, or otherwise commercially profiting from an invention. This period of exclusivity typically lasts between 17 to 20 years, depending on the relevant legislation. In return for this right, the patent holder must fully disclose the details of the invention, fostering a trade-off between exclusive rights and public knowledge access.

Approximately 80% of all technical information can only be found in patents.

According to the rules and practices of the United States Patent and Trademark Office (USPTO), the patent owner is the entity that can exclude others from making, using, selling or importing products based on the invention in the United States of America. 

In most patent applications, the inventors are employees of organizations that own the patent rights (by virtue of an employment agreement/assignee agreement with the company). An assignee is often the organization employing the inventor of the technology. 

In this scenario, the company is also the “applicant”, as it has the authority to file and prosecute patent applications and the inventor does not have any stance with the patent office. 

• A study from Ocean Tomo, LLC (2005) reports that in:
  1975: More than 80% of the US S&P 500 market capitalization is derived from tangible assets. 
  2005: Over 80% of the US S&P 500 market capitalization is derived from intangible assets. 
  Today, more than 90% More than 80% of the US S&P 500 market capitalization is derived from intangible assets. 
• This shift can be observed in all major economies worldwide. Intangible assets are frequently protected by intellectual property. Intellectual property is considered one of the most important assets of many organizations worldwide. 
• Within different Intellectual Property Regimes: ~ 80 percent of all technical information is found only in patents.
• Other intellectual property rights comprise copyrights, trademarks, and trade secrets, which function complementarily to patents. Patents protect functional ideas, i.e., technical solutions or inventions, whereas copyrights protect expressions of ideas, trademarks serve as source identifiers, and trade secrets protect confidential information. These different intellectual property rights regimes are administered by different governmental bodies and pertain to different regulations and lifetimes. 

There are numerous conditions that must be met to obtain a patent. It is impossible to compile an exhaustive, universally applicable list as the requirements root in the different legislative systems globally. However, some of the key conditions include: 

▪ The invention must be “novel”. That is, there must be some new characteristic that is unknown in the body of existing knowledge in its technical field. This body of existing knowledge is called “prior art”. 

▪ The invention must involve an “inventive step” or be “non-obvious”, which means that it could not be obviously deduced by a person having ordinary skill in the relevant technical field. 

▪ The invention must be capable of industrial application, meaning that it must be capable of being used for an industrial or business purpose beyond a mere theoretical phenomenon, or be useful. 

▪ Its subject matter must be legally accepted as “patentable”. In many authorities, scientific theories, aesthetic creations, mathematical methods, plant or animal varieties, discoveries of natural substances, commercial methods, methods for medical treatment (as opposed to medical products) or computer programs are generally not patentable. 

▪ The invention must be disclosed in an application in a manner sufficiently clear and complete to enable it to be replicated by a person with an ordinary level of skill in the relevant technical field. This is particularly relevant for US patents due to Article 35 of Section 112. 

Patents are territorial rights. In general, the exclusive rights are only applicable in the authority or geographical region in which patent protection has been successfully sought for. 

A patent is granted by a national patent office or by a regional office that carries out the task for multiple authorities. Currently, the following regional patent offices exist: 

▪ African Intellectual Property Organization (OAPI) 

▪ African Regional Intellectual Property Organization (ARIPO) 

▪ Eurasian Patent Organization (EAPO) 

▪ European Patent Office (EPO) 

▪ Patent Office of the Cooperation Council for the Arab States of the Gulf (GCC Patent Office) 

Via the regional routes, an applicant requests protection for an invention in one or multiple member states of the respective regional organization. The regional office handles these patent applications. The patent is granted when all the criteria for the grant of the regional patent are fulfilled. Subsequently, the regional patent is validated in the designated contracting states the applicant wishes to have patent protection in. 

The Patent Cooperation Treaty (PCT) assists applicants in seeking patent protection internationally for their inventions. It is an international treaty with more than 150 contracting member states and administered by the World Intellectual Property Organization (WIPO). The PCT makes it possible to seek patent protection for an invention simultaneously in many authorities by filing a single “international” patent application instead of filing multiple separate national or regional patent applications. 

Inventors can file an international patent application, in most cases, with their national patent office or directly with WIPO . Both of offices act as PCT “receiving offices”. 

If a patent application has been submitted to the patent office for examination, it is still pending and has neither been refused, rejected, or granted yet. 

Patents can become inactive for legal reasons (e.g., refusal, litigation), for business reasons (unpaid maintenance fees to keep patents alive) or simple term expirations (following end of lifetime). 

Inactive patents no longer provide any exclusiveness to their owners and accordingly have no business value. However, they still can (and must) be cited as prior art by subsequent patent.

A priority right is a time-limited right, triggered by the first filing of an application for a patent. The priority right allows the claimant to file a subsequent application in another authority for the same invention, design, or trademark effective as of the date of filing of the first application. When filing the subsequent application, the applicant must claim the priority of the first application to make use of the right of priority. 

Patents and applications contain various components, including 

▪ Title of invention 

▪ Inventor’s disclosure 

▪ Abstract of invention 

▪ Drawings 

▪ Specifications 

▪ Background of invention 

▪ Summary of invention 

▪ Brief description of drawings 

▪ Description of the preferred embodiment(s) 

▪ Claims 

On the front pages, various (bibliographic) fields of information can be mined and transformed into patent metrics for patent analytics purposes. These fields include:

▪ Date of issue

▪ Title of invention

▪ Inventors and their locations

▪ Assignee

▪ Date filed

▪ Classification and fields of search

▪ References

▪ Patent prior art

▪ Non-patent prior art

▪ Examiners

▪ Abstract

▪ Claims

▪ Drawings

▪ Description

A patent family is a collection of patent documents that protect a single invention in different geographical spheres. Depending on the patent family definition, the technical content covered is related if not identical. 

For example, if an invention is protected in two authorities, then this would be two patent documents, but only one patent family. The number of patent documents in the world always exceeds the numbers of patent families. 

Various definitions of patent families exist, including the simple or the extended patent family: 

▪ Definition of Simple Patent Family (DOCDB): “A simple patent family is a collection of patent documents that are considered to cover a single invention. The technical content covered by the applications is considered to be identical. Members of a simple patent family will all have exactly the same priorities.” 

▪ Definition of Extended Patent Family (INPADOC): “An extended patent family is a collection of patent documents covering a technology. The technical content covered by the applications is similar, but not necessarily the same. Members of an extended patent family will have at least one priority in common with at least one other member – either directly or indirectly.” 

The family definition used at LexisNexis® PatentSight® is based on the simple patent family definition, requiring the exact (not overlapping) priorities. This approach allows us to identify individual inventions and to discern between different technologies that would be considered one technology if we applied a broader family definition. 

At the patent offices, examiners – experienced subject matter experts for different technologies – assign each patent to different technology classes within the International Patent Classification (IPC). This is a hierarchical system for the classification of patents according to the different technology areas to which they pertain. The European Patent Office and the US Patent and Trademark Office also cluster by Cooperative Patent Classification (CPCs), which is an extension of the IPC. Moreover, the Japanese Patent Office (JPO) has their own patent classification systems, the FIs and the F-Terms. 

IPC:	CPC:
A Human necessities  B Performing Operations; Transporting  C Chemistry; Metallurgy  D Textiles; Paper  E Fixed Constructions  F Mechanical Engineering; Lighting; Heating; Weapons; Blasting  G Physics  H Electricity	A Human necessities  B Performing operations; transporting  C Chemistry; metallurgy  D Textiles; paper  E Fixed constructions  F Mechanical engineering; lighting; heating; weapons; blasting engines or pumps  G Physics  H Electricity

General tagging of new technological developments; general tagging of cross-sectional technologies spanning over several sections of the IPC; technical subjects covered by former USPC cross-reference art collections [XRACs] and digests.

There are two main challenges. First, technologies protected by patents usually span multiple IPC classifications on the different classification levels, but particularly as one analyzes the more fine-grained classifications. Second, these classifications are made during the examination phase of the patent, i.e., relatively early in the lifecycle of the technology and the related patent. Hence, using only the existing IPC or CPC classifications may lead to imperfect results with substantial noise. 

With increased patent applications and grant figures, no decision-maker or patent attorney is able to read all potentially required patents. Hence, smart text recognition is needed to narrow the number of patents required for review to a potentially relevant set of patents. In the second step, some quality assessments help to focus on the most promising/most relevant patents. 

Take autonomous driving as an example, the IPC classification “B60W 60/00” on “Drive control systems specially adapted for autonomous road vehicles” contained 2,646 (not otherwise classified) patent families as of 2021. Using smart software tools featuring technology clustering beyond IPC and CPC classifications yields 19,325 patent families. Subject matter experts confirm a precision level of this technology cluster of more than 90%. 

There is a strong link between innovations, patents, and technologies. In classical innovation literature, innovation refers to the commercialization of inventions, i.e., novel technological solutions. To allow their appropriation, intellectual property regimes such as patents, copyrights, trademarks, and trade secrets are used to protect different parts of firms’ proprietary knowledge. Among these, patents serve as temporary exclusive rights that allow their owners to exclude others from making, buying, or selling products and services based on patent-protected inventions. While it must be acknowledged that not all new technological solutions or inventions are patent protected, most inventions are subject to prior research. Hence, compared to alternative data sources such as expert opinions or surveys, patents provide the most comprehensive and objective data-based window on inventions and innovations available. 

Studies show that only 60 to 75% of patents have commercial value. 

References: 

▪ Gambardella, A., Harhoff, D., Verspagen, B. (2008). The value of European patents. European Management Review, 5(2), 69-84. 

▪ Webster, E., Jensen, P.H. (2011). Do patents matter for commercialization? The Journal of Law and Economics, 54(2), 431-453. 

You may know your core competitors and are also already tracking most of their patents. But are you aware of all the competitors in your space and their moves? This can be done by analyzing all the patents in a technology field. IP professionals can not only uncover hidden competition early on but also spot potential partners or licensees. Hence, technology field analysis is important to avoid missing out on opportunities and challenges. 

In addition, when comparing firms within different settings, e.g., different sizes or levels of maturity, comparing whole portfolios without consideration of technology fields may lead to the comparison of apples and oranges. For example, the comparison of a startup or a single-product entity with a multinational conglomeration may lead to biased and suboptimal results unless different technology fields are considered. 

To differentiate patents and patent portfolios based on their quality and strength, LexisNexis^® PatentSight+™ developed the Patent Asset Index methodology. The Patent Asset Index is a scientifically developed, peer-reviewed objective measure used to evaluate innovation and is, hence, not a black box. Today, the Patent Asset Index is relied upon by major corporations worldwide, governmental and non-governmental organizations, universities, and many other stakeholders interested in research and development, innovation, and/or technology management. 

Prior scientific research found that the two patent indicators that were most often positively and significantly related to patent value are forward citations and the geographical sphere of protection. The rationale is that patents protecting technologies that are used as prior art by subsequent technologies and the patents protecting them are valuable. In addition, patents that are protected in a larger geographical sphere are valuable. However, both these indicators are subject to limitations impeding the usability of these patent indicators for patent analytics purposes. Hence, LexisNexis developed the Patent Asset Index. 

Our metric calculates the number of citations a patent receives from later patents, correcting for the patents’ age and different citation trends in different technology fields and patent offices. In addition, LexisNexis® PatentSight® focuses on the market size rather than the mere geographical scope utilizing gross national income data from the World Bank. Combined, these values measure the business value or quality of individual patent families, the Competitive Impact. The Patent Asset Index™ is calculated based on this business value indicator, incorporating the aspect of “quality” when analyzing an entire patent portfolio consisting of multiple patents. 

Citations primarily originate from patent examiners who are highly aware of new inventions in their technological area and therefore provide an ongoing expert peer review of the worldwide innovation landscape. Filing a patent application in more countries increases the potential market, but adds significant additional costs, thus only patents with a high commercial potential will be filed broadly. This means that patents with a higher Competitive Impact are more likely to be protecting commercially successful products, become part of technical standards or licensing agreements, or are more likely to be litigated in court. 

The governmental pressure on corporations regarding green technology and zero emission is increasing. Examples are the Paris Agreement as a legally binding international treaty on climate change or the Corporate Sustainability Reporting Directive of the European Union. Corporations and other organizations need to and are willing to report on their sustainable research activities. As patents serve as an objective and publicly accessible data source on their research and development activities, sustainability reporting can be coupled with patent analytics.