Threat of Litigation and Patent Value What Technology Managers Should Know

Patent dealers have achieved exceptional growth in scale and scope of operations; today, their approaches to patent value affect intellectual property strategies for companies in many industries, even beyond the high-technology sector. To clarify the strategy patent dealers use, we studied a set of 392 U.S. patents sold to a patent dealer by a global consumer electronics firm; the dealer then sold the patents during 2010 and 2011. The analysis shows that under the strategy employed by patent dealers, patent value is driven by the threat of litigation the higher the threat of litigation, the greater the monetary value of the patent. The evidence suggests that broadly drafted, older patents that cover mainstream technology and for which evidence of infringement may be ambiguous present a greater threat of litigation, and therefore carry a higher value.