Why Patents Must Matter to Investment Professionals Today
Investment professionals increasingly understand that IP, particularly patents, comprises a significant aspect of corporate value today. However, the value of a company’s patents typically are not readily apparent from the documents themselves. Even when a company owns one or more patents that cover its products and technology, the value of those patents will often be greatly influenced by the presence or absence of patents owned by others.
Accurate valuation of any investment opportunity involving a company or group of companies that operate in an area where patents exist requires one to examine whether patents exist that might prevent or reduce competitive freedom in the relevant and adjacent markets. Put simply, the long-term viability of an investment opportunity depends largely on the surrounding “Patent Eco-System.”
The key to understanding the value of patent information in making investment decisions is to recognize what effect these legal documents have on the ability of companies to freely act in the desired marketplace. That is, patents can offer significant business value because they provide their owners with the ability to exclude their competitors from making, using and selling the covered product or technology. Patent owners can realize this value in the form of a competitive advantage that, when properly utilized, translates into a market higher price-and presumably higher profit margins– for the covered product or technology. However, the competitive advantage obtained from a patent depends substantially on the breadth and quality of the underlying legal documents. This means that valuation of a patent portfolio can be greatly enhanced by including an analysis of the underlying legal components of the patents.
How The Hutter Group’s Patent Analysis Methodology
Differs from Standard Patent Landscape Product
The Hutter Group’s investment professional clients understand that in order to get an accurate read on an investment opportunity involving technology, they must incorporate patent data into their decision-making criteria. This is easier said than done, however. As anyone who has ever read a patent will attest, these legal documents can be difficult to from which to extract data on an individual basis, let alone attempt to extract data from a group of patents that can be appropriately input into financial investment models. Our clients know that legal expertise must from the basis of any patent information analysis, which provides The Hutter Group with a considerable value proposition for investment professionals who seek accurate patent information to use in their decision-making.
The Hutter Group uses expert and proprietary methodology to provide insights into the legal strength and quality of a group of patents owned by a company or in a product or technology area of investment interest. Notably, The Hutter Group’s methodology differs from other patent analysis products because we look at each patent document using a “legal eye view,” as standard methodologies that generally treat patents as sources of technical data to be aggregated with a large group of other patents. Put simply, The Hutter Group aggregates the legal information from patents to provide investors with an accurate signal of the ability of companies to freely compete in the marketplace.
Moreover, because we have many years of experience obtaining and litigating patents for clients, The Hutter Group knows how to quickly identify “good” and “bad” patents, as well as understanding how to present clients with the most up-to-date status of patents and pending applications by hand-matching the data with the US Patent Office records. Such “data scrubbing” is not trivial because there is currently no way to automatically check the US Patent Office status and ownership. However, for investment professionals who need to understand how the Patent Eco-System might effect the ability of a company to compete in the relevant marketplace, it is critical for any data upon which decision-making is based provides accurate information about whether a patent document is “live” and, if so, who is its owner. The expertise imparted by The Hutter Group thus generates a higher quality product than that provided by standard patent landscaping methodolgies that do not include legal analysis in the data collection and analysis process.
What Information Does The Hutter Group
Provide in a Patent EcoSystem Analysis?
The Hutter Group evaluates at least the following aspects when evaluating the patent ecosystem related to a technology investment opportunity:
- Does the investment opportunity own patents that cover the product or technology that appears to serve as the basis of competitive advantage?
- Is the record of patent ownership clear or is there a title issue that should be corrected before sale or licensing efforts start?
- Are there any clearly discernible legal flaws in the patents that could restrict the ability to enforce the rights against a third party? Such legal flaws, which are often unrecognized by the owner, could reduce the perceived need for a third party purchase or license of the rights.
- How do the patents stack up against others in the same or adjacent space and what other companies are obtaining patent rights in the area?
Upon request, The Hutter Group can also provide strategic recommendations relating to existing or prospective patenting efforts. Additionally, The Hutter Group can include in a portfolio analysis an assessment of potential competitive threats as demonstrated by the patenting efforts of third parties.
The Hutter Group’s Patent Eco-System analysis provides investment professionals with a better understanding of whether the investment opportunity likely presents a sustainable competitive advantage. This information can greatly enhance the predictive value of financial models currently used to evaluate investment opportunities.
If you are an investment professional seeking a way to improve the way you evaluate opportunities, contact Jackie Hutter at 404-797-8124.