Study on Case Analysis and Cultivation Strategy of High Value Patent

Chen Huihui, Tian Siyuan, Zhu Wei, Wang Hongwu

（Wuhan Promotion Centre of Science&Technology Development,Wuhan,Hubei,430023）

Abstract: High value patents have high technical value,legal value and economic value.Cultivating high value patents is an inevitable choice to enhance the level of intellectual property creation and to build a powerful country with intellectual property rights.It is also an objective requirement for implementation of the strategy of innovation-driven development,and the promotion of high quality development.However,there are still difficulties in the definition,selection and application of high value patents.This paper makes an in-depth analysis of the connotation and characteristic of high value patents based on the classic cases,and analyzes the problems and challenges of high value patent cultivation in China,and puts forward some pertinent suggestions to the cultivation strategy of high value patents.

Keywords: high value patents;connotation case analysis;cultivation strategy

Introduction

Since the beginning of the 21st century,China’s patents have entered a period of rapid development.In 2017, the number of invention patents and authorizations in China ranked first in the world and the number of effective invention patents ranked the third in the world. At present, China is in a critical period of transformation of patent volume to qualitative change and construction of intellectual property power. Through in-depth study of high-value patents, people can effectively guide the smooth transition and rapid transition of China’s patents from high quantity to high quality. Both reasonable and moderate increase of patent quantity and effective improvement of patent quality can be achieved, which promote the development of China from factor-driven development to innovation-driven development.

1 The Connotation and Characteristics of High Value Patents

1.1 The Connotation of High Value Patents

The academic definition of high-quality patents has not yet been finalized. This paper starts from the research of patent value and defines the connotation of high-value patents from three aspects- technology,economy and law.

1.1.1 Patents with High Technological Value

As can be seen from the principle of granting patent rights,patents are a technological solution with novelty, creativity and practicality. It is the basic condition for high-value patent evaluation to have a certain technological content and conform to the novelty, creativity and practicality in the sense of patent law.However,some patents that are advanced in technology and high in complexity are not high-value patents.High-value patents may be basic technology entry patents, key node patents for inheritance and cutting-edge technology high-end patents. Technological evaluation of high-value patents should be comprehensively evaluated in combination with various aspects such as technology roadmap,industry status,and market prospect.

1.1.2 Impeccable Legal Value

The legal value of a patent comes from the exclusiveness of the patent right, ensuring that the patentee monopolizes the use, income and disposal within a certain geographical area within a certain period of time,obtains monopoly income and realizes the patent value. The protection of patents by law is the guarantee of the realization of patent value. The patent documents of high-value patents must withstand the examination and scrutiny of a series of administrative authorizations and civil proceedings such as substantive examination,invalidation request and infringement lawsuit.

1.1.3 Patents with High Economic Value

The economic value of patents is mainly embodied in two types — one is the value of the patent market that can directly generate economic benefits, the competitive advantage or economic benefit that the patent can bring in the market in the present or expected future. The other is the potential value of patents in terms of protection, trading and operations, in addition to market value, such as the reserve of future markets, strategic basic patents or core patents. Economic value is an important condition for high-value patent evaluation. High economic value patents should have at least one of the following conditions. First, patent technology application has a good market prospect, which can bring direct economic benefits, market competitive advantages and control power in present or in expected future. Second, occupying a basic or core position in a certain field, it can maintain the firm to build strong technological barriers and clamp down and hinder the competitor’s core patent layout.

The above analysis shows that on the basis of having a certain technological content (technological value), high patent document quality and stable patent rights (legal value), it has a good market application prospect,an important technological field strategic significance or a patent with higher futurel market potential value and other conditions may constitute a high-value patent.In short,a patent that can bring higher economic value must be a high-value patent, but a high-value patent does not necessarily directly bring high economic value.

In practice,it must be recognized that the value of patents does not often exist alone,but it exists and manifests as a whole. This is especially true for high-value patents. In most cases, high-value patents are a series of patent portfolio which is generally composed of a combination of basic patents,core patents,and peripheral patents.

1.2 Discrimination of High Value Patents and High-Quality Patents

The quality of patents is an important factor influencing the value of patents. The quality of patents is determined by technological advancement and legal protection, while the value of patents is determined by the market. Therefore, high-quality patents focus on the technological level of patents,which can be created by improving technological advancement and improving legal protection.However, high-value patents pay more attention to the value of patents, while the high value of patents needs to undergo creation,writing,review and finally goes to a new,highly economically efficient operating object and is screened out by market.

1.3 Screening of High Value Patents

Although the screening of high-value patents is difficult, screening high-value patents can provide high-quality resources for subsequent patent operations, improve the management efficiency and operational efficiency of patent assets. For corporate and intellectual property management, high-value patent screening can provide reference and assistance in technology tracking, technology introduction,and talent introduction in emerging and sophisticated fields. Therefore, effective screening of high-value patents is necessary. At present, the academic community has not yet formed a universally recognized and easy-to-operate patent value assessment method and system. In the early days, it mainly borrowed the cost method, market method,and income method in asset evaluation.At this stage,the method of bibliometrics is mainly used to evaluate the patent value. The accuracy and reliability of the assessment depends on how to set scientific and reasonable and computable indicators. At present,there is no indicator system that can accurately evaluate the value of patents, but existing research can help companies and intellectual property management departments to narrow the scope of finding high-value patents relatively quickly and accurately.

2 Case Study of High Value Patents

2.1 Bell Telephone

Generally speaking, high-value patents will bring huge economic value to patent holders. This economic value is not only market returns brought by the patent validity period, but also can create economic benefits for patent holders for a long time in the future. Bell’s telephone patent is a typical high-value patent. In 1876, Bell’s telephone patent application was approved. This patent provided a monopoly foundation for Bell’s rise. Bell Telephone Company was set up and this patent invention was also transformed into actual business. This patent is undoubtedly a high-value patent whose value is difficult to measure with current standards because it directly led to the birth of a super-monopoly enterprise- American Telephone & Telegraph Company. American Telephone & Telegraph Company (AT&T)was originally a subsidiary of Bell Telephone Company, which operated long-distance telephone service. In 1900, it took over all of Bell’s assets and became a parent company. It had long monopolized the US long-distance and local telephone market. Although it has been split and reorganized many times, it is still the largest telecommunications company in the United States. It ranked the ninth in the Fortune 500 list in 2017[3]and 6th among the top 100 most valuable global brands of BrandZ in 2017[4].

2.2 Secret Communication System

In the history of patent development, some patents, despite having high-quality technological solutions, failed to be put into use because of the untimely time, resulting in the failure to convert high-quality patents into high-value patents. Heidi Rama’s secret communication system is a typical case of high-quality patents that fail to achieve economic value. In 1941, Heidi Rama and George Anser jointly invented the “secret communication system”. Seeing from present, this patent is undoubtedly a high-quality patent, which is the core patent of modern wireless communication. Later,mobile phone communication technologies CDMA,wireless area network WLAN, WiFi and Bluetooth were invented based on this technology. Until recently, this patent was cited by many patents.However, at that time, the development of electronic technology was insufficient to support such technology applications, which did not attract the attention of the scientific community. Until 1997,CDMA-based 3G technology entered people’s field of vision and the scientific community remembered Rama—“mother of spreading frequency”.Electronic Frontier Foundation awarded Rama a late honor, but her patent has expired and she has not gotten any financial benefits with this patent in her lifetime.

2.3 Google’s PageRank Patent

Among the many patents that are still in the patent validity period,Google’s PageRank patent has brought high-value patents with huge economic benefits and market value, which laid the foundation for Google’s leading position in the Internet market.In 1998,Google founders Larry Page and Sergey Brin invented this technology at Stanford University and it was granted a patent in 2001.The patent is owned by Stanford University but is licensed to Google. As a condition, Stanford University holds a small share of Google and has made huge profits from Google and its patents.This patent and its technology have led to greater relevance or accuracy of search results. The PageRank patent provided an important basis for all Google’s web search tools after the establishment of Google and made Google’s current search industry.From the patent duration (20 years), the patent is currently in the effective period and continues to provide high returns to Google after bringing economic benefits to Google and Stanford University.

2.4 New Chemical Foaming Agent of Chlorine-free Fluorourethane

In China, due to information asymmetry and lack of patent services, a large number of high-quality patents have just stayed in colleges and universities, failing to achieve results transformation.In recent years, the state intellectual property management department has changed its working methods, actively sought high-quality patents,provided patent services for patentees and assisted in converting high-quality patents into high-value patents. Shandong University of Technology has developed a new chemical foaming agent for chlorine-free fluoropolyurethane.It is the beneficiary of this action. Due to the lack of corresponding core technology intellectual property rights, the development of China’s polyurethane industry has long been subject to foreign companies and it is subject to pay extremely high patent royalties every year. Since 2003, a research and development team of Shandong University of Technology has begun to develop new foaming agents.In 2011,after thousands of failures, they successfully developed a new chemical foaming agent for chlorine-free fluoropolyurethane. However, this achievement has encountered difficulties in applying for patent protection, because detailed technological routes and processes such as specific preparation methods and basic principles need to be stated when submitting a patent application. If there is no professional to help apply for a patent as long as “chlorine-free”is exposed key words such as fluorine“chemical method”, some international companies with technological accumulation and patent layout, can gain inspiration from public information and will crack the key technology and create a new alternative technology in a few years. Therefore, this innovation has been afraid to submit a patent application. Until April 2016,the staff of the State Intellectual Property Office and the Shandong Provincial Intellectual Property Office learned this situation during the investigation process, coordinated and organized a professional intellectual property service team. Four Chinese invention patent applications and one PCT international patent application submitted by the technology have successfully established a relatively complete patent protection system, laying a foundation for high-value patent operations. In the end, after a joint evaluation by a professional intellectual property service agency, the patent licensing fee was determined to be 500 million yuan and it was bought out by a new material technology company in Shandong for 20 years’monopoly use.

3 Problems and Challenges of Cultivating High-value Patents in China

3.1 Insufficient Patent Creation Ability of Enterprises

High-volume, high-quality patent creation is the source and foundation of high-value patents.However, the intellectual property creation consciousness and ability of Chinese enterprises are generally weak.

In 2017, China’s intellectual property big data and smart service system DI Inspiro and Zhiqicha and several gold service credit platforms jointly conducted a big data analysis of the company’s patent status.Until August 2017,there are more than 26 million non-individual industrial and commercial enterprises registered in the country, of which only 420 thousand have applied for patents,accounting for only 1.58% of the total, of which the highest application rate is manufacture industry. It is only 1/8, the patent industrialization rate is low and there are more than 300 thousand effective invention patents of universities and research institutions waiting for transformation[5].

At the same time, there are many domestic patents that are not strong at present.A large number of “low-quality patents”have produced, because local governments want to complete the assessment indicators or highlight their achievements and enterprises want to obtain preferential tax policies.Compared with developed countries, China’s invention patents account for a relatively low proportion of the total number of three types of patents, the licensing rate of patent applications,patent application rate and global coverage rate of patents.The effective invention patents are held for a short period of time, while the proportion of repeated authorization and invalidation patents is high and the overall quality of patents needs to be improved.

3.2 Low Proportion of Patent Operations

Good management and operation are important guarantees to enhance the competitive advantage of high-value patents and maximize their role.However, due to the lack of awareness of the patent value by the patentee, the imperfect patent operating service system, the inflexibility of the system and mechanism, the lack of operating funds and the lack of operating institutions and talents, the current patent operation in China is still insufficient. Many patents are idle after they are authorized.Meanwhile,they are not translated into commercial results and their potential value are failed to be dug deeper.

According to “China Patent Operation Status Research Report 2017” released by Hengqin International Intellectual Property Exchange Center,China patent operation involved 228,000 patents in 2017[6].However,according to the data released by the State Intellectual Property Office, by 2017, the number of effective patents in China has reached 7.15 million and the number of domestic patents granted in 2017 reached 1.72 million[7]. It can be seen that China’s patent operation currently accounts for a relatively low proportion. Among them, patent transfer is the main mode of operation,accounting for more than 90%. Patent licensing and pledge account for nearly 10%[6]and the operating model is relatively simple.

3.3 Difficulties in the Identification and Screening of High-value Patents

For the management and operation of high-value patents, an efficient and accurate identification and screening mechanism is very important. At present, there is no clear official definition of high-value patents. There is no universal scientific standard for evaluating high-value patents. In addition, China has a large number of patents and numerous industry classifications.Therefore,how to set up a quantitative indicator system that is scientific and reasonable and fully reflects the characteristics of various technological fields is a big challenge.

At the same time,the value of patents has a lag,from patent applications to conversion applications,generating value often with a large time span. In particular,high-value patents can be truly functional after the number of patents granted by the enterprise reaches a certain threshold and is concentrated around specific fields.The development and changes in technological fields and industry sectors during the period will also have an impact on the value of patents. At the same time, high-value patents often play a role in the form of patent portfolios and their value is related and phased, which is difficult to measure them separately. All of these have brought certain difficulties to the identification and screening of high-value patents.

3.4 The Layout of Key Industries Is Suppressed by Foreign Companies

In 2017,“Regional and University High-Value Patent Rankings 2016”issued by Beijing Guozhi Patent Early Warning Consulting Co., Ltd., from the perspectives of patent rights stability, protection scope, technological applicability and technological quality. All the inventions and utility model patents of the state that were still valid at the time were evaluated for patent value and 46,506 core high-value patents were identified. Among them,there are 20,820 patents from domestic applications,accounting for only 44.8%of all patents[8].It is worth noting that in the key field of the electronic information industry, the number of foreign applications is much higher than the number of domestic applications, which is more than twice the domestic. Among the top 10 high-value patent applicants in the electronic information industry, the 1st-9th are Microsoft,Samsung,Panasonic and other foreign companies.Only one Chinese company- State Grid Corporation ranks 10th. Among the top 10 high-value patent applicants in the pharmaceutical industry, Jiangnan University ranks the seventh and the rest are foreign-funded enterprises[8].

From the perspective of patent use, the use of intellectual property fees for external payments in China reached US$28.6 billion in 2017, with a deficit of US$23.812 billion,a year-on-year increase of US$978 million, of which the communication industry accounted for a large proportion.The United States, Japan, and Germany are the major producers of China’s intellectual property royalty trade deficit,accounting for nearly 60% of the total deficit, of which the payment of US intellectual property fees increased by 14% year-on-year[9]. These have confirmed from the side that there is still a huge gap between China’s high-value patents and that of developed countries and the layout of key industrial fields needs to be strengthened.

4 Cultivation Strategyof High ValuePatents

4.1 Vigorously Promoting Enterprise Patent Creation and Emphatically Improving Patent Quality

In order to guide and support enterprises in R&D investment,China will set up R&D institutions,strengthen the internal management system of intellectual property rights and cultivate state-level intellectual property advantage enterprises and demonstration enterprises. It shall also improve government management and service levels,comprehensively using fiscal, taxation, finance,investment, industry, energy, environmental protection and other policy instruments, vigorously establish enterprises, universities, research institutes for creating patents use and other intellectual property rights, giving full play to patent incentive guidance function. China shall highlight the patent application quality guidance of patent evaluation work in the region and establish a quality information monitoring system for patent applications for regions,industries and various entities. Strengthening the timeliness, accuracy and comprehensiveness of the investigation and handling of irregular patent applications in the process of patent examination help the patent invalidation declaration system to control the quality of patents and improve the connection mechanism between patent administration and judicial protection for high-quality patent control. It will accelerate the cultivation of high-quality patent agents and institutionalized and standardized patent agency industry, strengthen the training of patent agents’practical skills and improvthe level of patent application writing. It is useful to promote the formation of high-quality patent applications through encouraging applicants to break the existing patent application model and establishing patent application teams by patent agents, enterprise R&D engineers,intellectual property managers,marketing teams.

4.2 Improving the Level of Patent Operations and Maximizing the Value of Patents

On the one hand,it is necessary to revitalize the stock, discover a batch of patented technologies that are easier to realize industrial application from existing effective patents and focus on promoting the transformation and implementation of high-quality patents in universities and research institutions. The patented technology with broad market prospects will further strengthen the patent layout and optimize the patent portfolio strategy to make it more suitable for industrial applications and the realization of value.

On the other hand,it is vital toattach importance,strengthen patent operations and effectively play the role of high-value patents, improving the patent operating legal system, especially the legislative protection in the process of patent transactions.China will guide enterprises to develop patent strategy layout and build a patent pool. Therefore, it is convenient to strengthen the introduction and training of operational talent teams in patent analysis,transfer, licensing, defense and litigation and organize regular training for R&D managers, patent operating companies and IP service agencies. China shall collect,analyze and apply service information of patent operations at home and abroad by establishing a patent platform for information data operating. It is critical to accelerate the cultivation of specialized patent operating companies and intermediaries,provide support in taxation,loans,grants,improve the public operation service platform and give full play to the role of industry organizations and intellectual property service agencies. It shall improve the intellectual property pledge financing mechanism,guide and encourage banks and financing institutions for providing more high-quality, customized patent financing products and financing services for high-value patents.

4.3 Efficient Identification and In-depth Analysis of High-value Patents with Big Data and Artificial Intelligence Technology

At present, the combination of big data analysis and artificial intelligence technology and patent information has been successfully practiced such as information database search and analysis, patent application file error detection, patent document translation assistance and so on. In particular,artificial intelligence has broad application prospects in patent search, patent writing, novelty judgment,infringement judgment, etc. Its increasingly powerful learning ability can retrieve the most valuable types of information more accurately and efficiently. In the value of patent assessment,rational analysis of patent layout and strategic analysis of competitors are expected to play a powerful role in achieving rapid and accurate identification of high-value patents and improving the effectiveness of patent layout,operations,and management.For example, the Japan Patent Office issued an action plan in 2017,proposing the use of artificial intelligence for patent administration, which will gradually move from easy to difficult in the form of quality defect review,trademark classification survey, prior art search,invention and classification, understanding auxiliary of patent content and patent review decision to realize the introduction of artificial intelligence technology.[12]

4.4 Strengthening the Layout of High-value Patents in Key Fields

It is necessary to focus on strategic fields of major and weak fields such as electronic information,biomedicine,advanced equipment and new materials to further strengthen the layout of high-value patents and IPR training for enterprises in key areas, as well as encourage enterprises to participate in the standardization of IPR management, formulate and implement IP strategies. The ability of patent application transformation should be guided by patent subjects to lead the creation, drive management and form protection. Enterprises,universities, and research institutes shall be supported to establish high-value patents for patent-investment patent-order innovation, patent supply, demand docking mechanism, patent sharing and income distribution mechanism.It is also vital to play the role of industrial intellectual property rights and other platforms, strengthen joint research on key technologies of key industries, layout of high-value patents and risk prevention and control, improve the creation, application and protection of open intellectual property rights, integrate intellectual property resources and catalyze the application of intellectual property rights.