Patent explosion creates challenges — and new opportunity — for intellectual property law firm

Hang around inventors long enough and the innovation bug might rub off. That’s one way to look at the journey of Minneapolis-based patent and intellectual property (IP) law firm Schwegman, Lundberg & Woessner (SLW).

Over the past several years, the firm has evolved from defending clients’ patent claims to developing and spinning off patent analytic software tools to compete in a market that one industry insider estimates at $200 million globally.

Patent attorney and SLW partner Steve Lundberg said his firm saw a looming “big business for analyzing companies’ patent portfolios … It used to be about how many [patents] you have accumulated … the number of patents filed. Now the name of the game is to understand what they mean.”

SLW’s path also parallels growth of the “tech-saturated economy” and an explosion of patent filings over the past three decades, Lundberg recently told an audience of investment professionals at the CFA Society in Minneapolis.

Today, the image of a patent attorney filing the paperwork on a gizmo brought up from an inventor’s basement is woefully out of date. While the explosion of invention has transformed our lives and economy, the sheer volume — the deluge — of IP also has transformed the practice of patent law and created a new industry in how information about intellectual property itself is looked at.

Forty-five percent of the 7.6 million patents issued in the United States since patent No.1 in 1790 have been awarded in the past 30 years, and the total number of active patents outstanding stands at more than 3 million. With multiple documents supporting each patent, there are tens of millions of patent documents globally. In 1980, fewer than 300,000 patents were outstanding in the United States. That’s about the number issued every two years, according to the U.S. Patent and Trademark Office.


Social networking patent filing trends

Source: Schwegman, Lundberg & Woessner

SLW, which ranks in the top 10 patent law firms globally, according to Managing Intellectual Propertymagazine, took a cue from its inventive clients as it developed, patented and spun off two software ventures in the past five years. The first was a web-based IP portfolio management system, FoundationIP, which the firm sold in 2005.

Two years later, the law firm developed Claimbot, a software tool that gives clients a “big picture” view of opportunity and risk in target technologies they are either developing or evaluating for development or acquisition. It can help companies quickly identify what concepts are covered by a particular patent, identify who controls certain technology areas, guide potential development efforts to steer clear of violating existing patents and target unpatented areas.  It can also be used to identify acquisition or cross-license opportunities and potential business partners. The firm spun off a separate company in 2007, Lucid Patent, to manage use of the Claimbot tool.

SLW has several other patent tools under development, and Lundberg sees a potential market for investment firms analyzing the strength of IP portfolios in companies they invest in, though it is not the primary market for Claimbot.

“Most law firms are pretty content dealing with litigation and documenting claims and filings … only really progressive ones are getting into analytics,” observed Anthony Trippe, current chair of the patent information user group and director of IP analytics at 3LP Advisors, http://www.3lpadvisors.com/ a consulting firm on patent strategy and acquisitions.

Patent analytics evolved out of text mining and content analysis software for the banking and newspaper industries to “assimilate enormous amounts of technical data and provide insights not available elsewhere,” he said.

 “There are very few opportunities … for a business to exclude competition and dominate a market” solely based on patents, Trippe said. But businesses “are missing a tremendous opportunity” to create unique and sustainable market positions by harnessing patent knowledge, he added.

The playing field has moved away from trying to establish a dominant IP position to understanding where a company can build IP relationships. “Large and small companies have to maintain table stakes” with their patent portfolio, he said.

It’s less about litigation than about identifying potential partners or acquisition candidates, creating cross-licensing agreements, and preferred vendor or supplier contracts. For example, Apple needs cross-licenses with suppliers for the hundreds of components that make up the iPhone. “It’s the cost of doing business,” Trippe noted.

He believes that patent analytics can “level the playing field” between the tinkerer working in the basement, the small company and a large corporation with huge resources. Previously, a small company would take an invention to market and “hope to get lucky [that it could defend its patent]. Now they can now explore the landscape quickly, make better decisions and increase their chances of success,” he said.

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