The Risks of Patent Pruning

Prior to 1866, ice skates were either strapped onto or screwed into the bottoms of one’s boots. The strapping method was often uncomfortably insecure and screwing skates into the soles of boots renders pricey footwear useless in every other regard. Enter the Starr Manufacturing Company’s Acme Spring Skate which clamped onto the boot securely without damaging it. This innovation made skating accessible and popular, and it is considered a major contributor to the popularity of ice hockey. Even the King of Spain famously owned a pair of Spring Skates (which he had plated in gold — as you do).

However, in 1873 Starr allowed their patent on the skate to lapse. Whether this was a clerical error or a strategic choice is unclear. Either way, it allowed a bevy of competition (including CCM) into the market. By the Great Depression, Starr could no longer keep up and closed their skate manufacturing business in 1939.

This is, obviously, the worst-case scenario when a patent owner decides to prune their IP. However, are there other dangers with letting one’s patent lapse? I sat down with Hexos Founder and CEO Ed Murgitroyd to chat about the risks of abandoning IP, the motivations and wisdom of “pruning,” and what may be viable alternative strategies.

The Risks

As the above example illustrates, the most apparent (and most important) risk when abandoning a patent is the loss of exclusivity, thereby allowing competitors into the arena. Patents can often serve as deterrents to would-be competitors who worry their own innovations may be similar enough to be considered infringement — and keep their innovations off the market while the patent is in effect. Thus, even patents that aren’t actively protecting a product or method can be effective in carving out exclusivity within a market. Ed even confessed that in his patent attorney days he would watch competitors’ portfolios to see if particular patents would be renewed — knowing he had clients ready to swoop in!

Another danger of abandoning one’s patent is the loss of credibility or clout. Large patent portfolios are intrinsically valuable to investors and/or potential buyers. While it’s easy to quantify the funds saved by abandoning patents, it’s very difficult to quantify the loss of opportunities said patents might have provided.

Lastly, reactivating abandoned patents is very challenging. While most jurisdictions have grace periods for missed maintenance payments, those grace periods are usually only about 6 months — and come with additional fees. While it is technically possible in most jurisdictions to reactivate a patent beyond the grace period (restitution), this avenue is only available to those who can prove that the maintenance payment was missed inadvertently.

The Reasoning

So with the dangers established, why would anyone ever let an active patent lapse? Almost exclusively, the reason is cost. Maintenance fees are not inexpensive and in most jurisdictions they get steeper the longer the patent is active. Additionally, patent owners often have the same innovation patented in several jurisdictions to ensure global enforcement. Finally, one may have to contend with foreign agent fees and/or service feeswhen an owner is unable to manage patent renewals themselves. So, the cost of maintaining patent protection on even a single innovation can add up quickly!

However, as Ed is quick to point out, while the cost of maintaining a patent is significant, the cost of obtaining a patent in the first place is often even more so. Not only does one incur significant fees during the application process, but the associated cost of researching and developing an innovation should be considered as well. Given how much energy goes into securing a patent, abandoning a patent to avoid costs feels to Ed like “tail wagging dog.”

Which isn’t to say that Ed is encouraging a sunk cost fallacy; sometimes abandoning a patent is indeed the prudent thing to do. For example, sometimes technology has developed such that a particular innovation is obsolete. However, even in such cases, Ed urges caution. After all, sometimes technology renders once-obsolete technology relevant again! Additionally, a technology you’re no longer using may be useful to someone else, so it’s worthwhile to explore other options.

The Alternatives

The primary motivation to abandon a patent is to save money. Ironically, choosing to abandon your patent may be leaving money on the table. Rather than simply letting a patent lapse, patent owners could instead license the patent to interested parties, or even sell it outright. For companies with large portfolios who are regularly pruning, it may be worthwhile to commit resources to finding and negotiating such deals; however, other companies may not have the means to spend energy looking for buyers or licensees.

It may come as little surprise then that there are companies who will find and negotiate such deals for you. Working with experts who know the patent landscape across multiple industries is a great way to secure a fruitful licensing deal or to offload deadweight patents in a more lucrative way.