Whitepaper: Patent strategies in the 2012 economic environment

Patent strategies in the 2012
economic environment
Mark Cohen, Matthew Loftus
June 2012

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© Sagentia 2012
1. Introduction
Difficulties and changes in the macro-economic climate have forced companies to alter the
way they carry out their research and development. This, in turn, has had an effect on the
approach of many organisations to intellectual property. The most significant changes that
we have noticed from our work include:
- R&D budgets targeted at developed countries have been subject to significant ‘belt
tightening’. Budget holders have to do more with less while remaining innovative and
at the top of the market. New market trends and new stakeholder demands, resulting
from changing consumer demographics, challenge the healthcare and consumer
industries in particular. Adapting and responding to these challenges in developed
countries before the competition is key to achieving revenue and margin targets.
- There is increased focus on how to appropriately and successfully address the
continued growth of ‘emerging markets’. Many organisations are rethinking how they
enter and operate in these markets. From an IP perspective this means building and
executing a strategy for protecting market-specific products, including accounting for
the current states of IP enforcement and likely evolutions as they become more
“developed”.
- Emerging and non-traditional markets are not all the same. Some markets (for
example, Russia and Brazil) are driven by new found material wealth. Much of South
Korea and Taiwan’s new wealth stems from technological innovation. China has
benefited from its low cost labour and flexibility around large scale manufacture. In
addition, the individual wealth and sheer number of consumers in these markets vary
widely. Companies need tailored IP strategies for operating within each of these
markets, whether for sourcing suppliers, manufacturers or selling to new customers.
- Although the introduction of regulatory initiatives in recent years have improved the
quality of patents granted and restricted actions that could lead to uncertain patent
expiration dates, these initiatives have not provided enough certainty to overcome the
appeal of patent infringement litigation, which is at an all-time high. The growth of the
‘non practicing entity’ is an obvious culprit and of particular concern.
To better understand how industries perceive these changes, Sagentia conducted a survey
investigating the varying perspectives and comparing the different approaches being taken.
Our survey ran between December 2011 and February 2012. We received contributions
from 73 professionals across the fields of corporate IP and product management,
representing a variety of sectors. This report summarises our survey findings and provides
our interpretation of what they mean for the industry.
Methodology
Sagentia’s survey consisted of 32 questions that were accessible through a web-interface.
This was supplemented by additional telephone research. The survey participants were
segmented by business sector as set out in Figure 1.

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Figure 1 - Respondent breakdown by sector
For general analysis, all responses were used. For more detailed analysis, selected subsets
of data from the three largest sectors were used:
 Financial, Legal and Business Services
 Manufacturing
 Medical Devices and Pharma
21%
18%
14%
12%
10%
25%
Financial, Legal and
Business Services
Manufacturing
Medical Devices and
Pharma
Communications, Media
and Internet
Energy and Utilities
Not Stated

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2. R&D and patenting focus
The macro-economic environment over the last few years has challenged R&D departments
with some difficult decisions. Traditional or ‘developed’ markets are experiencing
significantly slower growth rates than emerging markets, but it is the developed markets that
most organisations understand best. While the emerging markets present the greatest
volume growth opportunity, traditional markets still offer higher margins and, for now, the
largest revenues. There are also a number of demographic, regulatory and market changes
that are challenging the way products are used, the features and efficiency they deliver and,
perhaps most important to this report, the level of IP protection that is considered for them.
In the last twelve months we have noted many corporate restructures taking place as senior
executives try to better position their companies to respond to the changes of traditional
markets and to navigate the growing demands of new markets.
Recognising the impact that many of these changes would have on R&D and therefore on
intellectual property, Sagentia’s survey included a number of questions focused on R&D and
patenting. What were companies expecting in terms of R&D project volumes, patent filing
volumes and the nature of the R&D projects themselves? And would expansion of filings in
emerging markets be at the expense of filings in traditional markets?
In response to these questions, we found that 45% of respondents expect their overall
number of R&D projects to increase, while 24% expect this number to fall (Figure 2). This
suggests respondents anticipate recovery rather than long-term decline, although the
geographical drivers of the recovery are less clear. The most optimistic sector was
Manufacturing from which 55% of respondents expect R&D project volume growth. The
most pessimistic sector was Medical Devices and Pharma, which does not expect an
increase in the number of R&D projects. Seventy one percent of respondents in this sector
expect no growth and the remainder expect a decrease.
Figure 2 - Expected change in R&D project volumes (all responses)
These changes in R&D project volumes correlate strongly with expected patent filing
volumes - more than 75% of respondents expect their filings to increase or remain the same
(Figure 3). This reflects a continuation of 2010 and 2011’s rebound in PCT filings following
the negative growth in filings in 2009.1,2
12%
33%
31%
18%
6%
Increase significantly
Increase somewhat
Stay about the same
Decrease somewhat
Decrease significantly

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Figure 3 - Comparative change in R&D project volumes versus filing volumes (all responses)
When considering R&D projects, respondents broadly expect to focus on new product
development as well as incremental developments (Figure 4). Although a push into
emerging markets is expected (see below), new product pipelines, rather than repurposing
existing products and technologies, will be the likely driver. We believe that this may reflect
the growing trend of multi-national companies establishing R&D capabilities in emerging
markets for developing market-tailored products.
Figure 4 - Expected focus of new R&D projects (all responses)
Responses largely were not surprising and match Sagentia’s recent experience: our clients
are still heavily focused on new product development but are aware that such new products
now have to address a wider range of geographical markets and demographics than before.
Of note is that medical device and pharmaceutical leaders are the most pessimistic about
R&D; when constructing our detailed analysis, these respondees showed the lowest focus on
new product and technology development and a higher than average focus on repurposing
their technologies for new markets. Many of the larger medical device companies in
particular seem to be very focused on how to deliver successful tailored products to the
emerging markets, particularly China and India, without compromising on profit, developing
overly complicated operations or being impacted by IP infringement. These challenges are
real but we think surmountable.
0%
10%
20%
30%
40%
50%
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70%
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100%
R&D projects New filings
Increase somewhat
Stay about the same
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
New product and
technology
development
Incremental
developments
Repurposing for
new markets
Agree strongly
Agree
Neutral
Disagree
Disagree strongly

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3. Patenting strategies
This section of our questionnaire looked at where companies are expecting to focus their IP
filings, how they will manage their IP and what approaches are being considered for licensing
and enforcement. From the previous section we can see that R&D projects in emerging
markets are expected to grow but are companies planning to protect this investment with
formal intellectual property rights or through other mechanisms, for example brand
protection? This might indicate the level of faith that western companies have in the IP
frameworks of emerging markets.
Our survey also questioned companies’ expectations in terms of licensing and enforcement.
Should we expect increased activity in either outbound or inbound licensing and how are
companies planning to address the increasing costs of litigation?
Changes in filing geographies
Figure 5 illustrates how respondents see their filing volumes changing across different
geographies.
Figure 5 - Expected change in geographical filing volumes (all responses)
Overall, the majority of companies expect to maintain their level of filing in the Western and
Asia Pacific geographies. However, there is a significant proportion - roughly 35% of
respondents - who expect to increase their filings in these regions. Nearly all respondents
expect to see an increase in filings for emerging markets in Brazil, Russia, India, and China
(“BRIC”). While many companies have traditionally been wary of the patent system in such
markets, continued education about their operation, business necessity and expectations for
continued reform may be driving the expected increase in filing.
Based on Sagentia’s recent work, we believe that the trend for additional filing in emerging
markets will continue. This will, most likely, be coupled with greater scrutiny on the number
of geographies prosecuted during the PCT phase and the number of states maintained after
EP grant.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Western Asia Pacific Emerging markets
Increase somewhat
Stay about the same
Decrease somewhat

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Changes in licensing
Respondents answered questions about how they expect their levels of in-, out- and cross-
licensing to change over the next two years.
Figure 6 - Expected change in licensing activities (all responses)
Only a small minority of respondents expect any decline in licensing activity. This may be
explained by an increasing number of patents and cross-fertilisation between companies and
industries3
. Of interest is the expected increase in out-licensing (55% of respondents expect
this to increase, versus 38% for in-licensing and 40% for cross-licensing); this finding is
consistent with the expected changes in portfolio management in terms of securing extra
value through licensing (see below). It is also evidence that more companies are embracing
all aspects of open innovation rather than just the technology sourcing elements.
Specific highlights from the detailed sectors include:
 The three largest business sectors all showed similar responses to the expected growth
(or otherwise) for in-licensing, suggesting that this aspect of open innovation is well
established. Conversely, levels of cross-licensing and out-licensing had large variations
across these sectors.
 Medical Devices and Pharma is the only sector that expects a significant decrease in
licensing activities, specifically in-licensing.
 Nearly 80% of Financial, Legal and Business Services respondents expect to increase
their out-licensing activities in the next two years. Interestingly, only 20% of this sector’s
respondents expect to increase cross-licensing activities. As the various players seek to
license their IP to others, it is likely that the balance will shift towards cross-licensing.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Level of in-
licensing
patents and
technologies
Level of cross-
licensing
Level of out-
licensing
patents and
technologies
Increase somewhat
Stay about the same
Decrease somewhat

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Enforcement
Enforcement is an area of particular interest for any technology business. With litigation
costs spiralling due to both increased infringement cases and growth of non-practicing
entities, we wanted to understand where companies felt this was headed. Is the perception
that this will continue to get worse or will it start to be addressed? Parts of the America
Invents Act of 2011 (“AIA”) were directed squarely at this issue but what else is being done?
At Sagentia we have noticed greater investment in front-end research and consortia prior-art
review arrangements but we were curious to see if this was a trend that others were
experiencing as well.
Respondents answered questions about whether they expect to increase or decrease the
number of litigation cases they file over the next two years (Figure 7).
Figure 7 - Expected involvement in litigation as plaintiff (all responses)
Whilst 50% of respondents expect to see no change, 36% expect to increase their level of
litigation to enforce their intellectual property rights. When looking at the business sectors, a
disparate view is observed:
 Medical Devices and Pharma expects the largest decrease in litigation at approximately
28%. Litigation can be a hugely expensive activity and this figure may be the result of a
loss of appetite in pursuing such cases, with patent owners seeking to resolve disputes by
other means.
 Financial, Legal and Business Services expects the largest increase in litigation at
approximately 43%. The inclusion of non-practicing entities (a.k.a., “patent trolls”) in this
sector may be driving much of this growth.
 Manufacturing has about 83% of respondents expecting no change, the largest such
response.
4%
10%
50%
31%
5%
Decrease somewhat
Stay about the same
Increase somewhat

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Figure 8 shows the trends in US litigation over the last 12 years.4
Figure 8 - US patent litigation cases commenced, 2000-2011
The fall back in litigation volume after the 2008 financial crisis can be clearly observed as can
the upswing in 2010 and more so in 2011. We would expect the volume of infringement
litigation cases to be significantly higher in the US in 2012 partly due to the upswing (as
evidenced by Figure 8 and our survey findings) but also due to the restriction on multi-
defendant suits introduced in the AIA.
What can we expect for the future? Although 50% of our respondents don’t expect any
change in the number of litigation cases they will be involved with, we think that the expected
increase in out-licensing and in-licensing will have a positive impact. There has been
growing evidence that more is being invested in front-end analysis but still no signs that
litigation is slowing down. This may be a big ship to turn and so we will continue to monitor
for signs of a slowdown.
1500
2000
2500
3000
3500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(est)

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4. Management of pipeline IP
With budget cuts and cost pressures affecting all departments, organisations today need to
concentrate on improving the cost/benefit ratio of their IP portfolios. In this section,
Sagentia’s survey focused on how companies were planning to manage their pre-publication
“pipeline” IP. What were the most important aspects of their IP activities? What is the
prevailing perception of value linkage between IP and potential products? And what
approaches are being taken to prepare for out-licensing?
Respondents first were asked to answer questions about how their management of pipeline
IP is likely to change in terms of the following aspects:
 Value linkage between pipeline IP and potential products. Ensuring that the patents being
progressed cover specific products or technologies for attributable revenue, as opposed to
just blocking utility.
 Licensing opportunities for new IP. Prioritizing patent applications that may offer
opportunities for license revenues.
 Prosecuting only the most promising disclosures. Companies are no longer chasing
opportunities that counsel has advised may be problematic.
 Alternatives to patent protection. Utilizing other forms of protection such as trade secrets
and commercial agreements.
 Use of offshoring in the authoring and prosecution process. Shifting all or part of the
drafting and prosecution processes to lower-cost geographies, such as India.
Figure 9 sets out how respondents see the importance of the above aspects changing in
response to market realities.
Figure 9 - Change in focus of patent pipeline processes (all responses)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Value linkage
between pipeline
IP and potential
products
Potential license
opportunities for
new IP
Prosecuting only
most promising
disclosures
Use of
alternatives to
patent protection
Use of offshoring
Much less important Less important Stay the same More important Much more important

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Overall, respondents expect that the recent economic crises may cause companies to re-
think some aspects of their IP pipeline management (e.g., value linkage), while expecting
other aspects to remain largely unchanged (e.g., offshoring).
Value Linkage
The link between intellectual property and R&D strategy/future product portfolios is key. At
Sagentia, we believe that one area of undue risk is when R&D and IP processes are
disconnected. We have seen this lead to delays, increased costs, incorrect filings and
unnecessary exposure. Equally however, if the IP department gets involved too early then
you can end up with patent filings for concepts that don’t ever make it to market. Many of our
clients have put additional review steps (stage gates) in their pipeline management
processes to ensure that value linkage is established at the earliest possible stage. Is this a
general trend occurring and what is the general perception of value linkage between IP and
R&D?
The majority of our respondents expect an increasing focus on linkage between IP and
value-generating products or technologies. Sixty-eight percent of respondents expected that,
given the current climate, the focus on value linkage between IP and potential products will
become more important. Twenty-three percent of respondents expect the level of focus to
remain the same.
The rising importance of linking owned IP to valuable product opportunities was particularly
noted in the Financial, Legal and Business Services sector, with 90% of respondents
expecting that value linkage will become more important and the remaining 10% expecting
the focus would remain the same.
Only the Medical Devices and Pharma sector reported a decrease in value linkage, with
about 28% stating that it would become less important, though this is somewhat offset by
57% who stated it would become more important. Given the long development timescales
and regulatory hurdles in this sector, it is likely that value linkage is more complex to
establish early on in the development and patenting process than for other sectors, leading
to this response.
Potential out-license opportunities for pipeline patent applications
A majority (61%) of respondents expect that prioritising pipeline IP that may offer licensing
opportunities will become a more important part of their pipeline management processes.
Thirty percent of respondents expect this factor would remain the same. Within the detailed
sectors, only Medical Devices and Pharma diverged from this picture in a similar manner to
its responses for value linkage.
Not surprisingly, when Sagentia asked respondents how they expect their efforts to generate
value from their existing patent portfolio through licensing to change, similar results were
seen (60% expect their efforts to increase, 38% remain the same and 2% expect a
decrease).
While respondents state that out-licensing will become more important, only a small minority
of Sagentia’s clients appear to have active, non-legal, out-licensing programs. The majority
of out-licensing appears to be driven by specific external requests or by enforcement from
counsel after ad-hoc R&D intervention. We identify that a key factor in successful out-
licencing is that the business needs to establish a dedicated role for this to be pursued as it
falls between the technical, legal and business development domains.

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Prosecution of the most promising disclosures
A majority of respondents (53%) expect to become more conservative in prosecuting patents
by only pursuing the most promising disclosures. This suggests less focus on the more
speculative applications or narrowing the scope for those in which the prior art is more
complex. Within the detailed sector view, there were only minor discrepancies from this
figure.
Unless companies purposefully set up a structure for legal and business to make these
decisions, they will usually have the problem of having patented too much. If a technology is
of strategic importance, we expect companies still to pursue these patents despite difficulties
in the examination process. Companies may end up with a narrower but still viable patent as
a result.
Use of alternatives to patent protection
Due to the economic climate and high price of patents, we were curious as to whether
companies were increasingly considering alternatives to patent protection.
The use of alternatives to patent protection (e.g. trade secrets, commercial agreements,
public disclosure) was seen as increasingly important by 46% of respondents. This is a
notably smaller proportion than the factors discussed previously in this section and is the first
area for which the majority is not increasing. Despite the costs and complexities of the
patenting process, the alternatives may not offer sufficient levels of protection for the majority
of respondents. In addition to the smaller proportion of respondents that expect to increase
their use of alternatives, we noted a high proportion that expect to defocus on the use of
alternatives (24%).
Within our client base, Sagentia has not detected any noticeable shift in the use of
alternatives to patenting. Given the strength of patents when compared with other forms of
intellectual property rights, we do not find this surprising. The economic environment has
however seemed to have at least raised some interest in exploring alternatives.
Offshoring
Companies have traditionally used offshoring for filing and prosecution in foreign markets.
We asked if offshoring might also be used for native market authoring and prosecution as
well due to the economic constraints.
As with the use of alternatives to patent prosecution, respondents did not seem to expect a
large move towards offshoring in the authoring and prosecution process with only 34%
stating that offshoring would become more important versus 28% that expect it to become
less important. Within the detailed sector view, Financial, Legal and Business Services
presented a dual-face with 50% of respondents expecting to increase their use of offshoring
and 37% expecting to decrease it – somewhat at odds with the remaining sectors and the
overall position.

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5. Management of existing patent portfolio
With the economic climate putting pressure on budgets and many companies having a
significant proportion of patents producing relatively little value, management of the existing
patent portfolio should be a key area of focus. Over recent years, Sagentia has assisted
several clients in the build of strategic Intellectual Property management functions which
provide portfolio management activities over and beyond those typically provided by legal
counsel. We have found that companies with large patent portfolios increasingly benefit from
these services, which include maintaining patent portfolio business alignment in light of
shifting technology and market landscapes, looking for license opportunities for non-core
IPRs (both by technology and by geography) and identifying cost saving opportunities
through selective abandonment.
Patent portfolios are traditionally very wasteful and we have noticed a growing trend towards
pruning of IP ’dead-wood’. This requires careful assessment to ensure that the patents that
have the best potential commercial value are retained. We were specifically curious to
understand how much investment and effort companies are expecting to put into this area.
We asked our survey respondents for their perspectives on how they would be managing
their portfolio of existing patents and patent applications . How active are companies
planning to be in generating value from existing patents in coming years? Are cost pressures
going to impact existing approaches? We asked our survey respondents whether they
thought their efforts to generate value from their patent portfolio through licensing over the
next 2 years would increase or decrease.
Figure 10 - Expected change in level of financial scrutiny on patent portfolio (all responses)
Of note is that 55% of respondents expect increased financial scrutiny on the cost-benefit
ratio of their patent portfolios. This is likely to be a driver for many of the findings herein.
7%
38%
38%
17%
Decrease somewhat
Stay about the same
Increase somewhat

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Value generation
Figure 11 - Expected change in efforts to generate value from patent portfolio
Figure 11 shows that a majority of respondents (about 55%) stated that efforts to generate
value from their patent portfolios would increase either moderately or significantly over the
next two years. This response was more prominent in the Financial, Legal, and Business
sector, but it was in the minority for Medical Devices and Pharma (about 30%).
About 14% of the Medical Device and Pharma respondents expect a significant decrease in
efforts to generate value from their IP portfolios. This sector also reported the lowest
expectation of value-generation effort increase. There is a variety of possible reasons for
this, including the diversion of funds for litigation, the higher likelihood that technologies will
be proprietary rather than transferrable and the expiration of key pharmaceutical patents over
the next few years (e.g., Plavix, Seroquel). This tallies with Sagentia’s experience, with our
clients in telecoms and consumer more likely to have active out-licensing programs than
those in the medical sectors.
Cost savings
As can be seen in Figure 12, a significant majority of respondents (about 70%) expect to
pursue cost savings opportunities through the disposal or non-renewal of non-essential
patent families. Sagentia has seen evidence of this recently with one client in the
telecommunications industry saving over €5m on patent renewal costs through the
identification of patents related to redundant technologies.
Around 48% of respondents expect to reduce the number of geographies automatically
renewed. This aligns with other surveys5
that report up to 50% of respondents expecting to
file in fewer countries going forward. While this may save costs in the short-to-medium term,
additional emerging geographies such as the BRIC nations may eventually become part of
the standard country set for patent renewals, thereby negating these savings.
Only about 25% of respondents expect to abandon complex prosecution cases. Given that
70% of respondents stated that value linkage will be of increasing importance, this suggests
that speculative patent applications are less likely to be filed in the first place.
0%
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100%
Total Financial, Legal
and Business
Services
Manufacturing Medical
devices and
Pharma
Increase somewhat
Stay about the same
Decrease somewhat

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Figure 12 - Cost saving opportunities to be pursued in next 2 years
0% 20% 40% 60% 80%
Disposal / non-renewal of non-core
patent families
Reduction in number of geographies
automatically renewed
Abandonment of complex
prosecution cases
Affirmative
Responses

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6. Spending and staffing related to patenting
activities
Sagentia’s survey also posed some questions on internal IP spending trends and whether,
due to economic pressures and entry into new geographic markets, companies were
expecting to see an increase in their use of external counsel and other external resources.
Respondents answered questions about staffing and spending changes in their IP
departments over the next two years. Our focus was on internal staff (legal and non-legal),
external spend (counsel, consulting) and the involvement of non-IP functions in the patenting
process.
Internal and external counsel
Figure 13 - Spending on counsel (all responses)
Despite a growing number of patent filings (WIPO reported a 10.7% increase in 2011 PCT
filings over 20101,2
), respondents did not expect their spending on IP counsel – whether
internal or external – to increase.
Respondents largely expect spending on external counsel to remain the same over the next
two years. Approximately half expect spending on external counsel, for prosecution and
enforcement, to be maintained at current levels, while the other half were split between
expecting either a marginal increase or a marginal decrease in spending.
Respondents did not expect spending on internal legal counsel to change significantly either,
with only 24% expecting to increase and 74% expecting spending to remain the same.
Given the expected overall static nature of spending on legal staff, the expected growing
volumes of patent applications and the increased complexity of managing pipelines and
portfolios which support open innovation, it is clear that companies are expecting to extract
far greater value from their current internal and external legal staff over the forthcoming
years.
0%
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100%
External counsel -
prosecution
External counsel -
enforcement
Internal legal staff
Increase somewhat
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Decrease Significantly

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Paralegal and consulting spend
Figure 14 - Paralegal and consulting spending (all responses)
A majority (59%) of respondents expect spending on internal non-legal staff related to IP to
remain the same, while 29% expect it to increase and 12% expect a decrease – all roughly
similar figures to those for counsel. Two industry sectors (Manufacturing and Financial,
Legal and Business Services) expect spending on internal non-legal staff related to IP to
grow more significantly over the next two years.
One area where spending is expected to increase is internal research on competitors and
external patenting activities. Fifty six percent of respondents expect spend to increase, while
only 7% expect a decrease.
Despite the current economic woes, companies are continuing to spend money on external
IP consulting services. Fifty nine percent of respondents expect such spending to remain the
same, while 32% expect it to increase, and only 9% expect a decrease. The two biggest
discrepancies to these figures appear in the Manufacturing sector (86% same, remainder
increasing) and Financial, Legal and Business Services sector (60% expect increase). The
fact that few respondents report reducing external spend may be indicative of improving
economic conditions or a realisation that, regardless of cost, keeping abreast of IP
developments that may impact future business is vital.
This increased focus on competitive intelligence, both internal and via external IP
consultancy, may be tied to the rise in litigation costs and companies’ desire to shy away
from patent litigation. By front loading their efforts into understanding the competitive IP
landscape and innovating into white spaces, companies may be able to successfully avoid
litigious circumstances. This is the basis for many of Sagentia’s IP landscaping
assignments.
Involvement of non-legal business functions
Respondents answered questions about whether involvement of non-legal business
functions in the patenting process is likely to change over the next two years. Two specific
functions, R&D and marketing, were considered:
0%
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40%
50%
60%
70%
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100%
Internal non-legal IP
staff
Internal competitive
IP research
External IP
consultancy
Increase somewhat
Stay about the same
Decrease somewhat
Decrease Significantly

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Figure 15 - Involvement of non-IP functions in the patenting process
Within the patenting process, R&D’s involvement may include the generation and
reviewing of patent drafts and assisting in the generation of responses to examiner
arguments. Fifty two percent of respondents expect R&D to become more involved in the
patenting process. A smaller, but still high, proportion (38%) expects R&D’s involvement
to remain the same. Only around 10% of respondents expect R&D’s involvement to fall.
When considering the detailed picture, Medical Devices and Pharma expect the smallest
growth in the involvement of R&D (approx. 30%) coupled with the largest expected
decrease (also approx. 30%), possibly due to the complexity in prosecution in the pharma
area. The largest expected growth in R&D involvement is from the Financial, Legal and
Business Services sector – this may be due to higher than average levels of software
patenting in this sector.
Marketing’s involvement in the patenting process is expected to fall outside the technical
and focus more on the commercial importance of pipeline IP to specific product
developments; therefore marketing is expected to provide inputs to patenting decisions
rather than being intimately involved in the patenting process. The level of involvement of
marketing is expected to grow by a smaller proportion of respondents (35%), with 55%
expecting it to stay the same. As with R&D, only 10% of respondents expect the
involvement of marketing to fall. Highlights within this include 33% of respondents from
the Medical Devices and Pharma sector expecting the role of marketing to decrease.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Involvement of R&D in
the patenting process
Involvement of
marketing in the
patenting process
Increase somewhat
Stay about the same
Decrease somewhat

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7. Conclusions
Sagentia surveyed key opinion leaders in the fields of corporate IP and R&D management to
understand how emerging markets and continued economic concerns about US and Europe
will impact IP management across a range of industries and geographies.
Our key findings based on 73 responses are:
 Despite the current woes, the general position is one of expected growth with only a
minority (about 20%) of respondents expecting to decrease R&D efforts and volumes of
patent filings over the next two years.
 More than 80% of respondents expect to increase their level of patent filing in emerging
markets. This is not at the expense of more traditional markets, however, with less than
10% of respondents planning to reduce filing activities in traditional geographies.
 A majority of respondents expect greater scrutiny on the cost-benefit ratio of their patent
portfolios. This is likely to lead to cost-saving measures including disposal of redundant
patent families and revenue generating activities such as selling licenses. In addition,
many respondents expect an increased focus on assuring patents in their portfolio link to
value-generating products.
 Overall, respondents did not expect significant changes in staff-related expenditures,
whether internal staff, external counsel, or third-party services, but did expect spending on
competitive research to increase.
Given the above, the wider economic issues and the ongoing rise in patent litigation, we
conclude:
 Historically, there was little agreement on the necessity of filing in the emerging “BRIC”
economies, as many companies were wary of the effectiveness of the patent systems in
these markets. Continuing reform and business necessity appears to be driving the
expected increase in filing.
 The increased spending on competitive research may be tied to the rise in litigation and
companies’ desire to shy away from patent litigation. By front loading efforts into
understanding the competitive IP landscape and innovating around white spaces,
companies may better avoid litigious circumstances.
 A number of factors come together to suggest that companies expect to extract far greater
value from their patent departments over the forthcoming years. Such factors include the
static nature of staff spending, growing volumes of patent applications, and the increased
complexity of managing patent portfolios which support open innovation.
Our research has only scratched the surface in illustrating the effects of the macroeconomic
climate and globalization on intellectual property management. Traditional markets are
showing lower growth potential and the emerging markets have ever-increasing economic
power. This shift presents businesses with new challenges in managing IP for less wealthy
customers and building products for emerging markets where margins may be lower but
volumes greater.
In the longer term, we expect to see companies to have multiple parallel product lines
serving the differing needs of the geographical markets they serve. Innovation will continue
in Western markets and traditional patent strategies will be required. More ‘frugal’
innovation, generating new low cost products or using older and cheaper technologies, may

19
© Sagentia 2012
serve consumers in emerging markets. Such developments may be protected using
traditional patent strategies but the use of older technologies presents more challenges,
especially when such technologies may not have been protected in the emerging geography
in the first place. In the absence of formal means to protect such developments, it may be
that transferable brand values offer the best opportunities for differentiation.
Sagentia’s focus is however more centred on the technical aspects of IP. With increased
emphasis on avoiding future conflicts and getting greater value from patent portfolios, we
expect to continue to work with organisations to help them evolve the way they work with
patented intellectual property through additional landscape analysis in the early stages of
product and technology definition; audits on patent portfolios to ensure ongoing business
alignment and maximum value extraction; and the creation of ‘IP robust’ products, where IP
analysis forms a critical part of the development process.
About the authors:
Mark Cohen is Head of Intellectual Property Services at Sagentia. Mark leads a team whose
main activities include: advising Sagentia's clients on the impact of external IP landscapes on
their technology developments and R&D plans; how to manage their patent portfolios to
minimize wastage and maximize return; and advising them on how to strategically protect
new product and technology developments. Mark and his team are also active in Sagentia’s
product development assignments, ensuring that new developments are isolated from
existing IP and building robust IP positions to protect revenue streams for the long term.
Mark's clients range from small start-ups through to large multinationals, typically in the
medical, food, personal care, automotive and telecommunications sectors.
Matthew Loftus is Business Development Manager at Sagentia. He previously spent eight
years practicing as an IP attorney, prosecuting patents before the United States Patent &
Trademark Office on a wide range of technologies, including medical, mechanical, and
electromechanical devices, semiconductor manufacturing, and software. He also worked on
patent litigations before United States District Courts. Before becoming a lawyer, Matt
worked in the custom plastics molding industry. He received his J.D., cum laude, from
Boston College Law School and his BSME from Worcester Polytechnic Institute.

20
© Sagentia 2012
8. References
Cited references
1. 2011 World Intellectual Property Indicators, World Intellectual Property Organisation
(http://www.wipo.int/export/sites/www/freepublications/en/intproperty/941/wipo_pub_941
_2011.pdf)
2. “International Patent Filings Set New Record in 2011”, WIPO press release
(http://www.wipo.int/pressroom/en/articles/2012/article_0001.html)
3. Open Innovation in Global Networks, OECD
(http://www.oecd.org/dataoecd/48/35/41721342.pdf)
4. Patent Litigation Statistics: 1980 – 2010, IPWatchDog
(http://www.ipwatchdog.com/2011/08/02/patent-litigation-statistics-1980-2010/id=17995/)
5. The US 2011 Global Patent and IP Trends Indicator, Inovia
(http://info.inovia.com/2011/02/us-2011-global-patent-ip-trends-indicator-is-now-
available/)
Background material
1. World Economic Situation and Prospects 2010, United Nations Department of Economic
and Social Affairs
(http://www.un.org/en/development/desa/policy/wesp/wesp_archive/2010wesp.pdf)
2. 2011 State of Innovation, Derwent World Patents Index
(http://img.en25.com/Web/ThomsonReutersScience/StateofInnovation2011.pdf)

Sagentia Ltd
Harston Mill
Harston
Cambridge
CB22 7GG
UK
Sagentia Inc
One Broadway
14th
Floor
Cambridge, MA 02142
USA
T. +44 1223 875200 T. +1 617 401 3170
Sagentia
Sagentia is a global innovation, technology and product development company.
We provide outsourced R&D consultancy services to start ups through to global
market leaders in the medical, industrial and consumer sectors.
With global headquarters in Cambridge, UK, and US headquarters
in Cambridge, Massachusetts, Sagentia works with clients from front
end market needs analysis through to transfer to manufacture. We deliver
innovation around new technologies and new generation products
and services that provide commercial value and market advantage.
The company also assists business leaders to create strategies
for technology, innovation and growth.
www.sagentia.com
info@sagentia.com

Whitepaper: Patent strategies in the 2012 economic environment

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