“Strategy should provide actionable guidance for selecting which inventions to file as patents.”

2. Stategize

With a complete understanding of the business and its technologies and IP assets, the patent team can effectively develop a patent strategy.

A good strategy provides actionable guidance for many if not all of the following issues:

(a) What specific business objectives will the portfolio serve? Typical answers include: enhance company valuation; thwart competitors; create monetizable assets; strengthen reputation for innovation; facilitate cross-licensing and freedom to operate; and deter patent suits by competitors.

(b) Where should the company focus its patent harvesting efforts?

(c) What specific criteria will determine which candidate inventions are filed as patent applications? This is the key deliverable of any strategy.

(d) How many patents should the company file?

(e) How does patent activity relate to the company’s other IP assets? Patent protection often complements other forms of IP protection.

(f) What types of claim-drafting tactics should be employed? For example, if the company aspires to license technology outside of its main line of business, patent applications should be purposefully directed to those other opportunities.

(g) When should the company seek accelerated examination (i.e., Track One filings)? Alternatively, when should the company extend prosecution and/or keep certain applications secret to allow the company to tailor claims to evolving markets?

(h) Should the company acquire patents from third parties, and, if so, which patents and for how much?

(i) In what countries should the company file patent applications?

(j) What performance metrics will be used to evaluate the company’s success in cost-effectively generating and monetizing valuable patent assets?

Strategy critically informs these decisions but, as in warfare, should not supplant sound tactics and great judgement, lest the company miss opportunities for obtaining valuable patents. We therefore think of strategy as a set of guidelines, not a rulebook.
Factors that determine strategy include:

Competitive Advantage. How does the company add value and make money? Which products and features are important to customers?

Attitudes of Investors and Potential Buyers. The customer is always right, and, if a goal of the patent program is to make the company more attractive to investors or acquirers, then patent filings should be tuned to the expectations and objectives of these parties.

Crown Jewel or Gating Technologies. Companies sometimes have a core technology that competitors must have to field competitive offerings. Obviously, protecting that technology is of paramount importance, and patents covering it are often called “crown jewel” patents. Like real crown jewels, these patents are more often reputed than seen. More commonly, a company may have a series of gating technologies. Competitors would like to but do not necessarily need to enter through each gate; however, a patent strategy that covers some or all of the gates will complicate competitors’ efforts to replicate the company’s success.

Consumables. If a company sells a machine andthe consumables used by the machine, patents offer an opportunity to control the consumables, such as by covering the interface between the machine and the consumables.

Competitive Threats. A useful reciprocal to the identification of crown jewel and gating patents is the inquiry into likely scenarios in which competitors could take market share from the company. Will the company face rote copies flooding in from overseas? Are its competitors canny incumbents that can quickly engineer new and better ideas to overtake the company? Considering ways in which the business could fail may help illuminate the path for building the company’s patent portfolio.

Competitive Patent Activity. The range, quantity, and quality of competitors’ patents may inform the number and type of patents that a company should procure. Also, the company should assume that incumbent competitors with substantial portfolios will retaliate against market share erosion by asserting those patents. The company’s portfolio should include patents assertible against such likely future adversaries.

Customer Needs. Ultimately, the goal is to sell products to customers. Understanding their needs helps determine which patent applications to file and what claims to include. This is primarily an operational issue that informs what claim coverage would be most valuable (i.e., claims on features that customers value). Customers may also have their own patent strategies that are impacted by the company’s product, and your strategy should address those issues as well. As a simple example, a customer may be concerned with freedom to operate when making a substantial investment in your technology. An optimal customer-facing position, in this hypothetical, is that you have anticipated this concern and procured a cross-license of the patents at issue. That fortuitous result would be the product of a well-crafted patent strategy.

Timing. If the company is late to market, it will confront a larger body of prior work (“prior art”) over which the patent office may reject the company’s patent applications as being “obvious.” An even more confounding problem arises if the company failed to file patents on products it launched in prior years. This may cast much of the company’s most valuable early work into the public domain.

Subject Matter. The patent office will not allow patents on “abstract ideas,” which can encompass a range of software- and business-related innovations. This will in some cases affect patent strategies.

Global Scope. Patents are granted on a country-by-country basis, so obtaining protection outside of the United States requires that corresponding applications be filed in multiple countries. Due to its significant cost, this is a procedure that should be undertaken with caution. Germany and (surprisingly) China have emerged in recent years as cost-effective venues for litigation, and, thus, patents in those jurisdictions may figure prominently in the patent strategy.

Budget. The patent effort must be appropriately designed and scaled to fit within the available budget. Developing a basic strategy and filing a dozen applications costs in excess of $200,000 and takes from 12 to 36 months. Building a truly formidable global portfolio costs millions.

For early-stage companies with few resources, the dark secret of patent law is that a portfolio of 2–3 patents is often of little value. This is usually the case with software or other complex products. Exceptions include when the company has a clear-cut, breakthrough technology that can be protected (at least from rote copying) by a “crown jewel” patent.

Nevertheless, to avoid the possibility of losing out (or to appease investors), many early-stage companies check the patent box and make a handful of filings. If a company feels compelled to move forward at this scale, it should appropriately tailor its efforts and temper expectations. For example, a day or two of analysis could be executed to make a reasonable determination as to which inventions should be patented. Applications on these inventions should then be filed as expeditiously as possible.

Integrating Other Intellectual Property. Utility patents are but one of several important types of intellectual property protection. Other types include design patents, trademarks, copyrights, and trade secrets, all of which can be used to garner competitive advantage and create value. Nondisclosure agreements and other contracts can also provide exclusivities and restrictions that complement IP protection. Companies need to consider all of these tools as part of an overarching IP strategy.

Industry Standards. Patents that are essential to the practice of a standard can be very valuable. In particular, if the company needs to implement a standard, having some standard essential patents may offset or eliminate patent license fees that it would otherwise owe to other holders of standard essential patents. At the same time, the company’s participation in a standard-setting process may impair its ability to enforce those patents.

Licensing Opportunities. While the company may be dedicated to a specific line of business, its technology could implicate other industries and present opportunities for licensing the company’s technologies to non-competitive third parties. Advance planning is necessary to ensure that patent filings cover these licensing opportunities.


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