A Business Leader’s Guide To International Patent Investment

This voice experience is generated by AI. Learn more.This voice experience is generated by AI. Learn more.Charles Dresser is a Partner at Caldwell, Global Technology Law Firm.

gettyPrior to joining private practice, I worked as an inventor and in-house patent lawyer at multiple technology companies. Each company operated across borders and had patents in multiple jurisdictions. I found that in-house patent teams commonly over-invest on foreign patent filings.

International patent investment benefits from expertise in (1) engineering, (2) law and (3) business. Engineers best understand the technology covered in a patent. Lawyers best understand patent examination and patent enforcement. And business leaders best understand the business’s geographic strategy. With few people competent in all three areas, teams can, commonly, make the apparently conservative decision of investing in patents in every conceivable jurisdiction.

This article aims to provide a simple foundation to help guide international patent investment.

Patent rights stop at the border—e.g., a U.S. patent cannot prevent infringing use of technology in France. So, for companies with cross-border business, patents in multiple countries may be justified.

A rough measure of patent investment-business alignment can be found by comparing a firm’s geographically segmented revenue with its patent holdings. For instance, a company having 70% of total revenue in the U.S. and 30% in Europe could be served by a portfolio of 70% American patents and 30% patents from European nations. Normalizing patent investment according to geographically sourced revenue can help prevent outsized patent investments in jurisdictions of relatively small importance.

However, patents can provide different legal and business functions in different countries. Accordingly, the utility (and concomitant value) of a patented technology in one country is seldom the same in another. U.S., European, Chinese and Japanese patents can each have different business functions and, consequently, different business value.​

U.S. patents offer the ability to seek large money damages awards. The United States is the only jurisdiction in the world that commonly awards significant (i.e., nine-figure USD) money damages as a remedy for patent infringement​. By comparison, many non-U.S. jurisdictions award no damages at all, while others award damages but less frequently and in much smaller amounts. As a result, U.S. patents have a unique value for entities that are seeking to monetize patent rights through the courts. Further supporting large damage awards, the U.S. market is often one of the largest for new technologies.

Outsized money damages through litigation can increase the independent economic value of a patent, i.e., value to investors who are not participating in the market, such as litigation funders and non-practicing entities (NPEs). More than half of patent plaintiffs in the U.S. are NPEs.​ By comparison, NPE plaintiffs are negligible in Asia and represent a small (but growing) minority in Europe. Thus, enforceable U.S. patents have a unique monetization value proposition.​

Like the U.S., the European market for new technologies is often one of the largest. Unlike in the U.S., 40 different countries are served by one patent office, the European Patent Office (EPO). Historically, once a patent application is granted at the EPO, it needs to be validated (i.e., converted into) a patent by paying fees in each country where a patent is desired. Likewise, patent rights were enforced country by country. In 2023, the Unified Patent Court (UPC) opened, seeking to address this multi-country problem, by allowing recipients of a grant at the EPO to validate and enforce a single Unitary Patent (UP) across 18 member countries.

However, many jurisdictions with important economies have not joined the UPC, including Great Britain, Switzerland and Spain. And validating in all 40 EPO countries seldom makes practical business sense. So, when considering European patent investment, consider which countries are most important commercially.​

Chinese patents have been increasing in enforcement utility. Changes in the statutes have increased potential damages awards and permitted patent enforcement through administrative processes (e.g., customs export control). For instance, maximum statutory damages for patent infringement has increased to a current maximum of 5,000,000 RMB; and, the statutes now allow award of punitive damages for intentional infringement of up to five times damages. Additionally, Chinese courts are increasingly awarding higher damages and piercing the corporate veil in patent cases (dissuading principals from establishing a second infringing company after losing in patent litigation).

With a functioning patent enforcement mechanism, Chinese patents can be useful for businesses that serve the Chinese market. Additionally, Chinese patents can leverage a business’s competitors within China to protect markets outside of China. Savvy businesses should be aware that Chinese patents can be a useful tool to protect revenues against overseas competition.

Patent litigation is rare in Japan. Even after adjusting for GDP, Japanese courts hear six and a half times fewer patent infringement cases than in the U.S. (patent cases: ~3,600 in U.S.; and ~550 in Japan​). However, Japanese patents have other functions beyond litigation.

For instance, Japanese companies often use patent landscapes and patent information as inputs in M&A, business and R&D strategy. Thus, the visibility of a Japanese patent portfolio may impact competitor decisions even without the specter of litigation looming.

Similarly, when an infringement dispute arises, Japanese patents can be used to avoid escalating confrontation. Patent rights may be cross-licensed, by a patent asserter granting a license to an infringing party in exchange for a license to use the infringer’s patents. Historically, cross-licensing has been common in Japan, relative to other jurisdictions.

The goal of an international patent portfolio is to establish useful property rights that contribute meaningfully to business value. At a high level, expect jurisdiction-specific investment to be proportional to corresponding geographic business. But do take care to understand that the utility and the business value of patents may vary by jurisdiction.​

The information provided here is not investment, legal, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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