Patent Portfolios

Intellectual Property and Patents

Article Snapshot


Gideon Parchomovsky and R. Polk Wagner


University of Pennsylvania Law Review, Vol. 154, No. 1, 2005


This paper looks at why large firms hold so many low-value patents.

Policy Relevance

Firms will continue to collect large numbers of patents, mostly benefitting large organizations at the expense of smaller ones. Some legal changes might help.

Main Points

  • In recent decades firms have begun to amass many more patents, but the many studies show t hat value of individual patents is low and decreasing. This is a paradox.
    • Theories that say that patents serve as signals to investors or  managers, as defenses in litigation, or a chance to strike it big, do not explain this.

  • Business studies show that strategic value is gained by combining patents into a portfolio of related but diverse patents. Examples include IBM, Qualcomm, and Gemstar. The value of the whole is greater than the sum of the parts.

  • The large patent portfolios held by large firms might be harmful overall.
    • Patent thickets, where patents interfere with research and product development, might become worse.
    • Patent lawsuits will become more costly. Large firms will have an advantage.
    • Mass licensing deals will be more common.

  • Some benefits of increased patenting are that patents must disclose innovations to the public, and that firms will do more research to build more diverse portfolios.  Small firms will be best off operating in niches neglected by larger firms.

  • Charging higher fees to patent applicants holding large portfolios might help. More lawsuits based on antitrust could help maintain competition. But there is a limit to how much the law can alter basic market forces.

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