Dormant Patents: Hidden Gems or Wasted Assets?

Aug 13, 2024

Dormant patents gathering dust are wasted R&D, immobilizing billions of dollars. Saudi Arabia is, for instance, seriously promoting innovation as part of its Kingdom's Vision 2030 to diversify the economy and promote innovation. Channeling the accumulating patents to the most relevant industrial application space would be daunting. Even in advanced economies like the USA, many patents fail to generate revenue. No R&D organization can move on with the dead asset of patents that do not generate revenue. Commercialization is the culminating part of the cycle of any economic activity and without that part, it becomes a one-way route to monitory sink.

It is estimated that a massive portion of patents worldwide remain dormant. Numerous studies have suggested that up to 90% of patents are never commercialized, meaning they do not result in a product or service being brought to market. In the United States, it is often cited that around 50-70% of all patents filed are not used commercially. The United States Patent and Trademark Office (USPTO) grants over 300,000 patents annually, and more than half of them cannot make any impact in the market.

The percentage of dormant patents can vary widely by region and industry. In some high-tech industries, such as pharmaceuticals and biotechnology, patents are more likely to be commercialized due to the high R&D costs and regulatory requirements. On the contrary, industries with rapid technological turnover, such as electronics, might see higher rates of dormant patents as technologies quickly become obsolete.

A large number of dormant patents represents a significant economic opportunity. It is estimated that billions of dollars worth of potential innovation are locked away in dormant patents. This situation is seen as a drag on economic growth and innovation.

The world over, universities continue to manufacture patents, and that happens to be the end of the road. U.S. universities and research institutions are significant holders of patents, many of which remain dormant. Despite the potential for commercialization, it is estimated that around 70-80% of university-held patents are not licensed or commercialized. Efforts are being made to improve the commercialization rate of university patents, such as through technology transfer offices and partnerships with industry.

Initiatives to fluidize these frozen assets are gaining momentum lately. There has been a growing focus on improving the utilization of dormant patents in sectors like clean energy, biotechnology, and information technology, where innovation is crucial.

In the US, there are concerted initiatives to bust the deadlock. Bayh-Dole Act (1980) allowed universities, small businesses, and non-profits to own patents on inventions resulting from federally funded research, with the hope of increasing commercialization. The USPTO has programs aimed at helping inventors and companies commercialize their patents, including the Patent Prosecution Highway and the Patents for Humanity program. Furthermore, various private companies and organizations have emerged to help commercialize dormant patents, such as patent licensing firms, patent auctions, and intellectual property brokers. More focused efforts are needed to make a conspicuous difference, for example, mandatory partnerships between universities and industries.

Technological Obsolescence: Patents may become outdated before they can be commercialized, especially in technology domains where swift evolution is taking place, such as robotics and computer applications.

Lack of Market Demand: Some patents represent innovations that fail to meet market needs or cater to a very narrow application area, which is not even a commercially active spot.

Financial Constraints: Companies or inventors may lack the resources to bring a product to market in a surgically focused way. Funded outreach blitz often becomes a necessity. The cost of maintaining and enforcing patents can be prohibitive, especially for small businesses and individual inventors.

Strategic Hold: Companies sometimes file patents to block competitors or to build a portfolio for negotiation or litigation, without intending to commercialize. In such a case, commercialization is not at all a priority.

Dormant patents can stifle innovation if they prevent others from developing similar or derivative technologies. Some countries have mechanisms like compulsory licensing to address this issue, but they are not always effective.

The process of re-animation of patents can become challenging and often complicated enough to be entangled in fussy legal spaghetti. The presence of overlapping patents in certain technologies can create a "thicket" that is difficult to navigate, leading to more patents remaining dormant.

As long as the patents are alive, there are still chances to translate them into fluid money. Reviving and capitalizing on dormant patents can be a strategic way to unlock hidden value. Here is a step-by-step approach to salvage and capitalize on these patents:

Inventory and Categorize: Begin by creating an inventory of all patents in the organization. Categorize them based on their technological field, market potential, and current relevance.

Patent Strength Analysis: Assess the strength of each patent by evaluating its scope, enforceability, and remaining life. Determine if the patents are still legally valid and relevant to current market conditions. Based on custom parameters, patents can be evaluated using modern AI-powered tools.

Market and Technology Alignment: Identify if there have been recent technological advancements or market trends that might make these patents more valuable now than when they were originally filed. Trend analysis can be easily done by subscribing to the latest AI tools.

File Continuations or Divisional Applications: If a patent is still within its term, one can explore the prospect of filing continuations or divisional applications to refine claims or cover new innovations.

Enhance the Patent with New Data: Update the patent with new research or data to improve its commercial viability and acceptability. Visibility is certainly a crucial factor in the commercial domain.

License to other companies: Look for companies in related industries that could benefit from the unclaimed patents. Offering licenses allows you to generate revenue without needing to develop the technology by the owner of the patent. There are certain industrial slots where the technology or innovation may be closely fitting.

Cross-Licensing: Engage in cross-licensing agreements where one can trade access to one's patents in exchange for access to another company's patents. This symbiotic arrangement can be particularly valuable in complex industries like technology or pharmaceuticals.

Sell the Patent: If maintaining or commercializing the patent is not feasible, one can consider selling it outright. Marketplaces and brokers specialize in patent sales. It animates the patents and serves to generate some revenue, which is better than nothing at all.

Auction: Some companies and institutions organize auctions for patents, where one can list patents for sale. This, in the first place, keeps the patents afloat and visible to the discerning elements in the domain.

Form Strategic Partnerships: Collaborate with other companies or research institutions to develop products based on one's patents. Sharing the development costs can reduce the risk while capitalizing on the patent's value.

Start a Spin-Off: If a patent has significant potential, consider creating a spin-off company focused on commercializing the technology. This strategy, apart from imparting a commercial dimension to the patent asset, holds the promise of diversifying the sphere of operations of the parent organization.

Identify Infringers: Conduct a patent infringement analysis to see if any companies are using other's patented technology without permission. Infringement screening can be performed very quickly by accessing the latest tools.

Litigation or Settlements: If infringement is identified, consider legal action or settlements. Infringement litigation can be expensive and protracted but might lead to significant financial rewards.

Join Patent Pools: Consider joining or forming a patent pool where multiple patent holders come together to offer a package of patents to licensees. This is common in industries like telecommunications and digital media. A package of mutually supportive patents would be a tantalizing opportunity for the buyers.

Tax Deductions or Credits: Consult with a tax advisor to explore if there are tax benefits associated with writing down the value of dormant patents or leveraging them in other ways. There are different tax holiday options in different countries.

Adapt for Emerging Markets: Explore whether the technology can be adapted for emerging markets or new industries. Sometimes, a patent that is not viable in one market might be in demand elsewhere. There are tools to check whether the patent in question resonates with emerging companies and emerging technologies.

Leverage in Marketing: Use your patents as a branding tool to highlight innovation in your company, even if the patents are not directly generating revenue.

Highlight in Fundraising: If the company is seeking investment, emphasize the strength and potential of the patent portfolio.

By taking a strategic approach to revitalize and commercialize your dormant patents, you can potentially turn them into a significant source of revenue or competitive advantage.

Obtaining exact statistics on dormant patents (those that are registered but not actively commercialized or applied in the industry) can be challenging because this information is often not readily available in a centralized or easily accessible form.

The situation regarding dormant patents is complex, with a sizable portion of patents remaining uncommercialized despite various efforts to unlock their value. The economic impact of these dormant patents is substantial, and ongoing efforts are being made to address this issue through legislative, institutional, and market-driven approaches. Strong and dogged national-level campaigns are needed to bring the hibernating patents into the industrial mainstream. Universities, industries, and governments could embark upon a demand-supply matching exercise with the support of the latest AI-powered databases such as Relecura.

Our professional services offer training and support to minimise time-to-value on the Relecura platform and make more timely, confident IP decisions.