Foundation of Investment Grade Patents

Foundation of investment grade patents is serious due diligence.

Getting solid, investment-grade patents is less about finding the gem as much as removing the dirt so that there are more possible gems in the portfolio. We do not know which patent will ultimately be the gem, but we can dramatically increase our chances by removing the ones with poor likelihood of succeeding.

The foundation is much more than a patent search. A high quality patent attempts to predict where the market will go over the lifespan of the patent, so the analysis needs to focus in the short term on competitive landscaping and in the longer term on broad market trend analysis. The goal is to forecast where the market is likely to go and to anticipate the value of the technology.

When we look at making an investment in an invention, we want to understand who are the likely infringers, and that begins our investigation into who would be interested in the eventual patent. We want to know that the players in the field are buying and selling patents, who those players are, and how the invention would fit in their portfolio, their business plan, and their product offering. We are not looking at the marketplace as it is, but as it might become.

Patents do not have value until the market “comes to the invention”. This may be predicted by the price reduction of component prices, changes in consumer tastes, development of a competing or complementary technology, government policy changes, or some external force that is out of the inventor’s control. Thinking through these possibilities – reading the tea leaves – can be very helpful in placing bets on technology through patents.

Each invention is predicated on several assumptions, and many of these assumptions are the current market. When BlueIron invests in a patent, we try to tease out these assumptions, which may include the high cost of certain components or the existence (or absence) of certain infrastructure. We try to explore what effects these assumptions have on the invention, and try to brainstorm how our invention would change or morph as these assumptions are changed.

Recognize that the patent will have a 20 year lifespan. What will change over the patent’s lifespan? Lots of things, some of which we can foresee and some of which we cannot. As we draft the patent application, we keep these issues in mind and try to guess as much of the future as possible. The whole point in spending the time, money, and effort is to create investment grade patents.