Whether law departments should claim revenue from patent licensing and sales

Should a legal department that supports or runs patent licensing count revenue from it and talk about being a profit center? Consider Microsoft, as described in Corp. Counsel, June 2010 at 76. The company’s intellectual property and licensing group manages nearly 23,000 issued and 38,000 pending patents around the world (See my post of Aug. 3, 2005: Microsoft and benchmarks of patents per billion of revenue; May 13, 2007: Microsoft’s patent management practices; Dec. 11, 2007: Microsoft’s software to classify large portfolios of patents; and May 13, 2007: Microsoft’s litigation against trolls.).

The law department “is developing a system to track the unit’s licensing programs and income more closely.” Clearly, a general counsel could seek to maximize patent revenue without trying to claim credit for that revenue. Still, the temptation would be strong to say, “Through our efforts, the company reaped $10 million in patent revenue – and, oh by the way, our total legal budget was $9 million.”

It is completely appropriate for a legal department to publicize its efforts to bring in revenue from the company’s patent portfolio (See my post of Jan. 16, 2006: patent auctions and value ratings of Ocean Tomo; and Nov. 28, 2005: another IP auction service.). It is not right to claim the revenue from patents when much of the work and infrastructure costs that enabled those patents were borne by the company.

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