In the dynamic world of intellectual property, holding onto every patent—especially those that are just sitting on the shelf collecting dust–isn’t always the wisest move. A long-term, strategic approach to patent portfolio management often involves the deliberate and calculated act of letting some go through expiry, a process known as patent lapse. According to the USPTO, when a patent expires “anyone may make, use, offer for sell, or sell or import the invention without permission.” That is, the patent becomes part of the public domain.
Strategically allowing patents to lapse can be a powerful tool for IP asset pruning, leading to significant cost savings, a more focused, impactful IP strategy, and risk management.
Cost efficiency gains
A primary driver behind a smart patent lapse strategy is cost efficiency. Maintaining patents, especially across multiple international jurisdictions, comes with recurring maintenance fees that can escalate over time. Through regular patent portfolio evaluation, organizations can identify patents that are no longer commercially viable, strategically irrelevant to your current business direction, or simply not worth the ongoing expense. This could be due to a variety of factors: changing market conditions that the patent less commercially valuable or relevant, lack of commercial success, the expiry of related patents that might diminish the value of a specific patent, and a cost benefit analysis of enforcing a patent against potential infringers.
Letting these less crucial patents expire frees up valuable financial resources that can be reinvested in protecting core, high-value innovations. For example, a recent U.S. automotive patent lapse analysis examined the financial impact of patent lapse strategies for major automotive manufacturers, finding that large original equipment manufacturers (OEMs) and suppliers could use lapsing strategies to save 20-30% per year in renewal fees, and major auto brands overspend $2-4 million annually on non-strategic patents.
More focused and agile IP strategy
Beyond cost savings, a well-executed patent lapse strategy allows for a more focused and agile IP strategy. As a business evolves and market conditions shift, some patents may become less relevant or the technologies they cover may become outdated.
Balancing emerging and legacy technology is critical to a focused IP strategy that aligns with current and future business goals. The same U.S. automotive patent lapse analysis found that, with the rise of autonomous and electric vehicles and the decline of the internal combustion engine, there was an associated impact on OEMs and their suppliers’ patent portfolios. Not surprisingly, the report found that engines and emissions have the highest lapse rates of all patent categories, with an industry average of 24%. On the other end of the spectrum, two categories had the lowest lapse rates: battery and charging (14% industry average), and advanced driver-assistance systems (ADAS) (13% industry average).
The key takeaway: Like any technology that is quickly evolving, as the automotive industry shifts toward electric vehicles, OEMs and suppliers should closely monitor patents and ensure their renewal strategies align to the shifting technology landscape (e.g., avoiding the risk of investing resources in protection inventions that no longer offer a competitive advantage) and such expiry strategies are integral to their current and future business growth.
Effective risk management
Furthermore, a proactive patent lapse strategy can also be a valuable tool for risk management. Maintaining patents in regions where an organization has no market presence or where the risk of infringement is low can be an unnecessary drain on resources. By strategically allowing patents to lapse in these less critical geographies, organizations can mitigate potential financial risks associated with maintaining broad, but ultimately underutilized, protection, reduce the burden of enforcement, and avoid potential counterclaims from alleged infringers.
Key elements of a patent lapse strategy
Given the benefits of patent lapse strategies, below are key considerations in making informed decisions on whether to keep a patent active in all or some jurisdictions, or to allow it to lapse. These include the following:
- Portfolio review: Regularly assessing the entire patent portfolio to identify which patents are still commercially valuable, strategically important, and worth maintaining.
- Market analysis: Evaluating the current and future market potential for the inventions covered by the patents.
- Competitive landscape analysis: Understanding innovation trends, key players, and other leading indicators that demonstrate potential risks for strategic decision making.
- Cost-benefit analysis: Comparing the costs of maintaining a patent (maintenance fees, legal fees) with the potential benefits (revenue generation, blocking competitors).
- Geographic prioritization: Determining in which countries it is most important to maintain patent protection based on market size, potential for infringement, and business strategy.
- Risk assessment: Evaluating the potential risks of allowing a patent to lapse, such as the possibility of competitors freely using the invention.
- Timing of lapses: Strategically deciding when to allow patents to lapse, considering the remaining term and the potential impact on the business.
Embracing a strategic approach to patent lapses is not about neglecting your IP; it’s about being smart, efficient, and strategically focused on how an organization optimizes its valuable innovations. By thoughtfully considering these key elements, companies can implement a robust patent lapse strategy that aligns with their business objectives and maximizes the value of their intellectual property portfolio.
UnitedLex helps organizations unlock their portfolio’s full potential, from portfolio evaluation to patent lapse review. Let’s talk.
