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Generating Cash from a Patent Portfolio: An Overview

By Andrew W. Carter and Fayth A. Bloomer
August 09, 2004

We have all seen the statistics:

  • About two-thirds of today's S&P 500 market capitalization comes from intangible assets, having doubled in proportion from 20 years ago.
  • More than $100 billion is collected annually in IP licensing income.
  • More than $200 billion is written off every year from IP impairments.
  • More than $300 billion in infringement (mostly innocent) occurs annually.

Today most professionals realize that the increasing value of intellectual property (IP) is a trend that will not be reversed. The accounting and reporting for intangibles is already catching up with the “real world,” most notably via Sarbanes-Oxley. More pertinent to this article is the fact that the financial services community is beginning to respond broadly with new products and services designed specifically to take advantage of this newly discovered wealth.

This is the first of a series of articles that will review various methods to generate cash from a patent portfolio. Only a flavor of each method is presented for this article; future articles will delve into the newer or more unique methods. It should be noted that the actual monetization of patents is often separate and distinct from the process of value creation ' the traditional focus of many IP professionals. Value creation comes in many stages, including invention, patenting, pooling, cross-licensing, and the methods discussed below. Cash is the ultimate byproduct, and, it is hoped, the ultimate goal of any economic effort, including patenting.

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