Patent Portfolios

Article Source: University of Pennsylvania Law Review, Vol. 154, No. 1, 2005
Publication Date:
Time to Read: 2 minute read
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This paper looks at why large firms hold so many low-value patents.


Policy Relevance:

Firms will continue to collect large numbers of patents, mostly benefitting large organizations at the expense of smaller ones. Some legal changes might help.


Key Takeaways:
  • In recent decades firms have begun to amass many more patents, but the many studies show t hat value of individual patents is low and decreasing. This is a paradox.
    • Theories that say that patents serve as signals to investors or managers, as defenses in litigation, or a chance to strike it big, do not explain this.

  • Business studies show that strategic value is gained by combining patents into a portfolio of related but diverse patents. Examples include IBM, Qualcomm, and Gemstar. The value of the whole is greater than the sum of the parts.

  • The large patent portfolios held by large firms might be harmful overall.
    • Patent thickets, where patents interfere with research and product development, might become worse.
    • Patent lawsuits will become more costly. Large firms will have an advantage.
    • Mass licensing deals will be more common.

  • Some benefits of increased patenting are that patents must disclose innovations to the public, and that firms will do more research to build more diverse portfolios. Small firms will be best off operating in niches neglected by larger firms.

  • Charging higher fees to patent applicants holding large portfolios might help. More lawsuits based on antitrust could help maintain competition. But there is a limit to how much the law can alter basic market forces.



Gideon Parchomovsky

About Gideon Parchomovsky

Gideon Parchomovsky specializes in intellectual property, property law, and cyber law. Parchomovsky has already made significant contributions to the field through his wide-ranging scholarship, having written numerous articles for major law reviews on property and liability rules, insider trading, trademarks, domain names, and patents. Most recently, he has been advocating the need for a comprehensive property theory and the need to introduce a value-oriented theory. Parchomovsky has received the A. Leo Levin Award presented to the best teacher of a first-year course.

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R. Polk Wagner

About R. Polk Wagner

Polk Wagner focuses his research and teaching in intellectual property law and policy, with a special interest in patent law. He has written over 20 articles on topics ranging from an empirical analysis of judicial decision-making in the patent law to the First Amendment status of software programs. His work has appeared in the Stanford Law Review, the Columbia Law Review, and the University of Pennsylvania Law Review, among several others. He is the author, with C. Nard, of Patent Law (Concepts and Insights) (Foundation 2008).