Patent Valuation is Like Data Compression

The neat thing about truth is that when we hit upon one aspect of it, connections to other aspects become obvious. This key benefit of polymath skills can be described as follows:

Looked at close enough, and also from far back enough, everything is everything else

This fuzzy philosophical idea becomes concrete when we compare the topic of the last post -- Patent Valuation Comes Down to Litigation -- with the field of data compression. This post explores this correlation.

The previous post discussed the following three approaches to patent valuation:

  1. Litigation
  2. Manual Transaction
  3. Data Analytics

Essentially, this list represents increasingly "lossy" representations of an original signal. In this case, the original signal is patent Litigation. That signal comprises all of the testimony at the trial concerning infringement, validity, and valuation, and the ensuing judgment.

In the world of music, the original signal can be the analog music playing on a legacy record, or the lossless representation of that sound on a compact disc.

Moving on now to lossy techniques, the claim charts used in Manual Transaction can be seen as a lossy representation of potential, future litigation. Although these claim charts are "lossy", they still retain high fidelity to the prospective original signal. In other words, they are a rather accurate roadmap of the contours of future litigation.

In this way, these claim charts are like MP3 representations of music. MP3 is a lossy format for representing music. But the fidelity to the original signal is so strong that they suffice for most music listeners.

Finally, the third approach to patent valuation -- Data Analytics — involves extremely lossy techniques. At this stage, the original signal is faint, if at all recognizable. But even so, this "highly compressed" data still reveals some sense of value. In the case of patents, this data concerns forward citations to the patent.

In the case of music, an example of an extremely lossy compression technique that still retains valuable information is digital fingerprinting. Just as a human fingerprint uniquely identifies a human without telling us anything more, so does a digital fingerpint of some music or a video.

And there we have it. We know which patent valutaion techniques are most useful because the sound ones line up just like increasingly lossy data compression techniques.