IBM’s High Abandonment Rate, Explained

2020 was far from a normal year and 2021 has not started much better. With so much uncertainty many companies are still looking for creative ways to control costs. A recent article from IAM brought up the fact that IBM recently hit 50% abandonment rate of their patent portfolio. These patents are abandoned before the first renewal fee or maintenance fee at 3.5 years.

IBM is not abandoning patents at a rate of 50% just because of the uncertainty. For IBM, this tactic is a necessity and a longtime strategy. The article brings up a good point that an IP renewal strategy can help reign in IP costs. IBM has always had a high abandonment rate (i.e., 40% to 50%) of patents at the first renewal/maintenance fee. IBM is not just doing this to cut costs. It is an essential practice for the world’s largest patent holder and filer to stay cash positive.

Crunching the Numbers On IBM’s Renewal Savings

The total maintenance fees for the life of one US patent for a large entity is about $13,500 (or about $6,700 for smaller entities). Multiply these fees by the roughly 6000 patents that IBM has recently abandoned. That adds up to approximately $81 Million in savings. That may not seem like much spread over the 20 year life of a patent. But remember, IBM saves this amount every year. IBM aggressive filing strategy necessitates that they abandon 40% to 50% of their portfolio each year, consistently. It’s easy to see how an aggressive and strategic IP renewal strategy is needed.

IBM is not randomly abandoning patents. It is more than likely that IBM has a robust strategy and system in place for valuing patents. And, importantly, identifying which patents need to be abandoned.

For IBM, it is essential they have an aggressive renewal strategy. Smaller companies might think they do not need such an aggressive strategy because they do not have that many patents. While that is true, they can still find cost savings through a comprehensive IP renewal strategy.

The Case for Strategic Patent Renewal

An effective patent renewal strategy should first identify the most valuable IP and weed out the less valuable IP. This assessment can be both empirical and qualitative. What are the patent’s technical strengths? What does the patent mean to my business?

Once a comprehensive IP strategy is in place, you can decide what the threshold is for renewal. When this structure has already been developed, it’s easier for companies to find additional savings. In times of uncertainty, save more by simply changing the threshold.

Furthermore, an IP renewal strategy can provide more than cost savings. It can be a tool to provide valuable insights into your current portfolio. Or, it can be an ongoing measure for evaluating IP further in its life cycle.

To learn more about IP renewal strategies continue reading or take a gander at this paper.

“AI Robots Running Your IP Renewal Strategy”.

Method for Developing an Automated IP Renewal Strategies

What is an IP Renewal Strategy and Software?

An IP Renewal Strategy provides a structured method for examining, reviewing, and valuing your IP. The purpose is to determine if it is worth the cost to renew your patents at each renewal or maintenance period. The renewal strategy also provides you and your company with some valuable insight into which IP is the most valuable. Meanwhile, the strategy helps to reduce costs by providing recommendations on which patents you may not want to renew. Often, company cultures perceive patent portfolios as a cost center. Using IP renewal strategies and software can help change that perspective by reducing costs and providing metrics that show the value of your IP.

The IP Renewal Strategy Process:

Extract your IP Value metrics:
- Interview stakeholders and extract the key IP value metrics. Understand how your company values and leverages IP – Every company values IP differently.
  - Metrics may include:
    - Patent Age and total maintenance fees left over the life of a patent.
    - Core vs. Non-Core to your business.
    - Does the patent map to a product – even going as far to associate revenues generated by the associated products?
    - Litigation/Licensing value.
    - Patent Strength.
    - And more…

Develop the IP Renewal Strategy
- Leveraging the IP value metrics, develop and organize the metrics into a structured strategy for reviewing IP to determine the value and what should or should not be renewed.

Customizing an Automated Software Solution
- Develop automated processes for each of the defined metrics.
- Combine the automated metrics into an automated system that will analyze your IP portfolio on each of the metrics and provide recommendations on which IP should be renewed or abandoned.
  - The goal is to automate a review process that would normally be manually done, where one or a group of people would need to review all the IP that is needed to be reviewed and determine its value.

Value to you:

You have an IP renewal strategy that aligns with what is valuable to your business.
Software that can help automate the review process and provide a suggestion on renewal decisions ultimately lowering IP renewal cost by weeding out low-value IP that’s not relevant to the business.
As a result of weeding out low-value IP, you have now increased the overall value of your portfolio as the remaining IP essentially should have the highest ROI.

How an Patent Renewal Strategy Can Save Your Company Millions