Building Patent Success In The New Innovation Ecosystem

News flash: the patent world is a fundamentally different place than it used to be. Gone are the days of anyone and everyone getting their hands on a patent with the hopes of extracting as much revenue as possible through lucrative litigation settlements. The American Invents Act (AIA) and a slew of decisions affecting patent validity and damages saw to that. And gone is a world where businesses succeed solely by holding patents.

Today what we see is an innovation ecosystem that rewards the doers — those who are building companies, raising investments, building technologies and risking it all to do so. In this ecosystem, intellectual property remains a fundamental pillar to achieving overall success, but not a means in and of itself. And to raise investment, protect markets and enable the outflow of innovation to adjacent industries, a strong patent operation is an absolute necessity.

But what should such an operation look like? Is it enough to hire a patent lawyer? How should the patent portfolio be managed? Can patents be sold and for how much? How about acquiring patents to round out gaps in the portfolio? And what does a company do if it is being copied and can’t afford to take the actions necessary to stop the copying?

Having created, managed, monetized and financed everyone from promising start-ups, to new publicly traded companies, to billion dollar companies, these are the questions that I commonly hear from prospective clients. Although it is nearly impossible to condense actionable wisdom into a multi-part series on the subject, what follows is my attempt to do just that.

To compete in our new innovation ecosystem — no matter big or small — there are a handful of competencies that an organization should master when it comes to their patent operations. At the risk of over generalizing, these are (1) sound portfolio development, (2) sound portfolio management, (3) building the right team and (4) smart patent deal-making. I will address each in order. What follows below is discussion of the first step, building a sound portfolio.

Step I: Sound Portfolio Development

It’s clearly not a revelation to suggest that a patent portfolio should be well-developed. Unfortunately, despite starting out with a solid plan for developing a patent portfolio, all too many companies find the plan quickly going awry. As prosecution begins in earnest, and internal technologies evolve, the initial set of patent applications quickly burgeons into many. Claims that were intended to be of a certain scope can end up being narrowed — sometimes quite significantly — in the interest of taking allowable subject matter. New applications continue to be filed and very quickly the portfolio can take on a life of its own, perhaps not even covering what it is intended to.

But hope should not be lost! Because paying due attention to particular portfolio developmental principles can go a long way.

Play Strategic Defense

It is often said that a patent portfolio should both protect a company’s products (defensive or core patents), and provide the ability to license and/or assert patents against third party products (offensive or non-core patents). In reality, the line between what is an offensive or defensive patent is murky at best. Whereas most patents start out defensive — after all, the patenting process takes place before infringing markets develop — they quickly become offensive when a competitor launches a competing, yet duplicative product.

Rather than focus on the defensive/offensive distinction, let’s focus on where the money should be spent. And the answer is relatively straightforward.   Above all else, make sure that your own products/technologies receive patent production and make sure that such protection tracks the evolution of those product/technologies. After all, your ability to raise investment, or protect copying of your technology in the event of success, is dependent on having patents that protect your technology in the first place.

But when it comes to defensive patenting, think strategically! Make sure, for instance, to claim the parts of your technology that will be discoverable in a copycat technology. Also aim to cover components of the technology that anyone trying to achieve a similar result would have to implement. We call these control points. And don’t forget that not all innovation needs to find its way into a patent application. It could be quite the competitive disadvantage, for instance, to seek patent protection on an algorithm that cannot be reverse engineered in the first place. Nor would it be a very strategic use of funds to seek patent protection on features of your technology, which even if incorporated into a competitor’s product, could not be discovered or proven. And if budget is an issue, a rich specification that offers the possibility to seek many continuations in the future, may be better than filing many patents on day one.

Finally, be careful to diversify the defensive aspects of the technology that receive patent protection. It is not uncommon for patent holders, once they’ve identified a particular feature for which an examiner is willing to grant a patent, to beat that feature to death via the filing of multiple, often duplicative patent claim sets — at the expense of additional important features that go unpatented. Over time the result is largely the same: a portfolio that seems sizeable but which upon more detailed review is actually fairly limited, both in size and strategic value.

But Don’t Forget Offense

The idea that a patent portfolio should include offensive assets is also far from new. The most obvious advantages of such protection are the ability to deter patent infringement lawsuits from competitors — knowing that your patent arsenal can be redirected their way — and the ability to monetize those patents through licensing campaigns. But despite knowing the value of offensive positions, many companies deep in the trenches of developing their own technology simply do not commit the resources to doing so. When resources are limited, defensive filings tend to rule the day.

So how does a company build an offensive patent position? For those with adequate funds, the easiest way is through strategic acquisitions. But for the typical company, for which acquisitions may be out of reach, the organic, homegrown approach is a necessity. Gather the engineers and brainstorm as many ways as possible to design around your technology or to achieve the same result through a different means. Then patent as many of those solutions as you can afford!

When it comes to offensive patenting, we are often asked how offensive patents are enough? And while the answer is obviously fact specific, there is one rule we counsel clients to follow. Don’t ever be in a position where you have to choose between maintaining patent protection for a product and risking the invalidity of that patent in litigation. In other words, there should be enough coverage to allow for an assertion against infringers without risking the core defensive assets of the company. More than once, we have worked with a company that, faced with a copycat product and the limited patent portfolio, had to risk either allowing the infringement to continue or having its core and only IP invalidated during a litigation. But were there at least one other family available for assertion, the core goals of ending copying while also maintaining a defensive patent position could have been achieved.

Avoid Founder’s Bias

Founder’s bias is the increased likelihood that the central figure in a company (often the Founder but could be others) will disproportionately favor his/her own ideas for a technology’s evolution over contributions of other teams within the company— particularly when it comes to elevating inventions to patent applications. At their infancy, many new innovative companies have one person who oversees and directs the company’s technology. That person often knows everything that is going on technologically, or deemed important, and has control over which inventions receive patent protection. But as the company grows, this set up is bound to skew the company’s patent development, and to also miss pockets of technological progress altogether.

As will be discussed in Part III of this series, it is a fundamental best practice for innovation intensive companies to install a multi-member panel responsible for monitoring technology development and seeing to it that the company’s portfolio adequately covers all of the relevant technology emerging from within.

Without such a process, the result could be a patent portfolio skewed toward the Founder’s ideas, which does not also capture alternative technologies or the developments of other groups in the company.

Pay Attention to the Weeds

Experience has shown that some of the best patents come not from an original idea underlying a technology, but from the engineers who are in the weeds and faced with the unexpected problems that arise when trying to make that technology work. These truly are where the crown jewels of patents lie. Because in being a first mover — and the first to experience the unexpected road blocks that line the path to execution — a first mover innovator has the opportunity to patent the solutions to those unexpected problems. These are extremely valuable control point patents that all portfolios should seek to capture. After all, these are the proverbial patent bridges that anyone must cross to achieve the final result. And because these patents solve original yet unexpected problems, they are less likely to be found invalid in later litigation.

And Keep The Portfolio Alive

In the end, all of the right strategies will not suffice if the portfolio is not kept alive. In the patent context, “keeping a portfolio alive” refers to filing rich specifications with a wealth of disclosure and maintaining a robust continuation practice that aims to keep at least one pending application alive at any one time. Keeping your portfolio alive through a robust continuation practice is the only way to ensure that your portfolio evolves with the relevant technology, while at the same time keeping your original priority date. After all, it is the rare inventor whose first patent in a family captures exactly what the competition is doing. But assuming a rich enough disclosure in the first instance, a robust continuation practice affords the luxury of fine-tuning your patent claims over time to keep pace with the competition. Often, it is the sixth continuation, which has been fine tuned as the relevant market develops, which generates the most licensing revenue for its owner.

TO BE CONTINUED… Up next is discussion of the key considerations underlying the management and monetization of a patent portfolio.