Outpacing the Competition E-Book

Robert L. Cantrell

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 618

Veröffentlichungsjahr: 2009

Beschreibung

Praise for Outpacing the Competition Patent-Based Business Strategy "Outpacing the Competition provides a useful IP management framework for rapidly evolving and inherently unpredictable R&D environments where companies are partners, customers, and competitors at the same time." -Marshall Phelps, Corporate Vice President for IP Policy & Strategy, Microsoft "Robert Cantrell's book Outpacing the Competition: Patent-Based Business Strategy?should be read by?anyone?involved in the practice of litigating or licensing patent rights or policymakers responsible for patent issues. Mr. Cantrell provides a cogent approach for applying decisional methodology and game theory to enhance the utilization and understanding of patent rights."-Bradley J. Olson, Esq., patent attorney, Washington, DC "Robert Cantrell makes a compelling case for using intellectual property as a core for building solid business strategy. He provides a unique and valuable perspective on competitive advantage, as delivered through patent-based business strategy. This is an excellent addition to anyone's business strategy arsenal." -Jeff Hovis, Managing Principal, Product Genesis, Innovation Genesis LLC "Robert truly treats patents and related intellectual property as both a weapon and a shield to help the reader use patents to out-maneuver global competitors of all kinds--the low-cost producer, the high-end innovator, etc. CEOs, attorneys, business and engineering professionals and the like will enjoy the military imagery and flavor provided by Robert. Thanks for clarifying how critical it is to have an understanding of patents in running a truly competitive global business today." -José W. Jimenez, Esq., Chief Intellectual Property Officer,AMS Research Corporation

Leseprobe

Table of Contents

Title Page

Copyright Page

Foreword

Preface

Acknowledgements

About the Author

Orientation

The Grant

Jurisdictions and Costs

Uncertainties

Patent Claims

Eighteen Months of Secrecy

Requirements to Obtain Patents

Conclusion

Chapter 1 - Introduction

Strategy Defined

Results

Reasons for Unpredicted Results

Patent Strategy Defined

Value Capture

The Nature of a Strategic Solution

Opposites

Strategic Inaction

Strategy and Change

The Perfect Strategy

The “Good-Enough” Strategy

Strategic Risk

Competitive Risk

Chapter 2 - Decision Cycle

The Question of Cost

Invention Review List

Four Rules of Patent Strategy

The Definition of a Decision Cycle

Chapter 3 - Assess

Defining the Problem

Problem Resolution

Identifying the Opposition

Evaluating Resources for Cooperate-or-Compete Decisions

Centers of Excellence

Parallel Lines of Competition

Dominant and Contested Positions

Sanctuary and the Dominant Position

In Summary

Chapter 4 - Decide

Defining the Goal

Fundamental Competitive Strategy

Four Key Effects: Eliminate, Isolate, Interact, Negate

Competitive Equilibrium and Disequilibrium

Leveraging the Three Centers of Excellence When Crafting a Strategy

Innovation

Advancement

Security

Section Summary

Chapter 5 - Act

Acting on the Goal

Acting Competitively

Mentally Prepare to Adjust

Categorize and Track Resources

Four Operational Tenets

How to Be Proficient at Operations

Tempo

The Luck Factor

Qualifying the Result

Act: A Summary

Chapter 6 - Connecting the Loop

The Invention Review List

Prior Art Search

Invention Elicitation

The Invention Audit

Chapter 7 - Two Imperatives

Imperative 1: CEO Involvement

Imperative 2: Master the Fundamentals

Chapter 8 - High-Tempo Patent Strategy

Set Common Viewpoints

Measure the Control of Technical Space

Accelerated Invention (TRIZ Example)

Conduct Invention/Patent Infiltration

Necessary Adjustments

High-Tempo Patent Strategy Advantages

Chapter 9 - Conclusion

Appendix - IP Strategy Boarding and Scenario Play

Endnotes

Index

Copyright © 2009 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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For more information about Wiley products, visit our Web site at http://www.wiley.com. Library of Congress Cataloging-in-Publication Data:

Cantrell, Robert L.

Outpacing the competition: patent-based business strategy/Robert Cantrell. p. cm.

Includes bibliographical references and index.

eISBN : 978-0-470-47105-0

1. Strategic planning. 2. Patent practice. 3. Competition. I. Title.

HD30.28.C362 2009

658.4’012-dc22

2008045555

Foreword

This latest book from Robert Cantrell and Landon IP is an attemptto further the understanding of the strategic use and nonuse of patents to achieve a larger business purpose. Having edited our previous book from Landon IP, I know how hard it can be to say something meaningful and to say it succinctly. The treatise Outpacing the Competition: Patent-Based Business Strategy is no exception.

Robert Cantrell, who leads our patent consulting operation, has worked hard throughout his career to raise the awareness of the business value of patents while providing tools and heuristics for assessing your IP strategies and that of your competitors. He has often worked at the edge of the industry where few people understand or appreciate what is seemingly esoteric. Fortunately, he has transformed and related many of these concepts over time, and applied them in our consulting practice. He has made “the difficult” more mundane and useful to organizations and individuals worldwide.

As context for the book, Landon IP is the largest patent search and IP analytics company in the United States. As of 2009, the company employs 185 full-time professionals across a wide range of technological disciplines. A large and growing amount of our revenues is the result of analyzing patent and technological information for businesses and law firms, and providing them with strategic options. We research patent portfolios in both emerging and developed technologies, and we help companies predict the behavior of their competitors with respect to their intellectual property. The company also teaches scientists, engineers, and business managers how to conduct patent analysis, maximize the value of their intellectual property holdings, and understand where future technological and business opportunities may exist.

To this extent, Robert Cantrell is a unique figure in the intellectual property field. He is one of the few practitioners who are relentlessly focused on improving the tools and techniques for making good intellectual property decisions. This is no easy task, as few individuals in the business world truly understand the strategic value of patents or patenting. Still fewer individuals have tools at their disposal to put this endeavor into successful practice.

It is our sincere hope that you will benefit from this treatise on patent strategy for business purposes. We expect that this book will generate significant thought and research, along with increased understanding and proliferation of patent-based business strategies. Robert and I would love to hear from you as you read or apply the principles and approaches espoused in the book.

Thank you for taking an interest in this important work.

David Hunt, CEO

Landon IP, Inc.

Alexandria, Virginia USA

January 1, 2009

Preface

This book, Outpacing the Competition, is about business strategy. I have written it, however, from the perspective of one component of business strategy: patent strategy. Patents are one of the primary tools that research and development-based companies use to establish and maintain their brands in the marketplace. Patents provide a window of opportunity for companies to enforce the exclusivity of their inventions before competitors have the opportunity to copy their ideas. If companies take advantage of this opportunity, they will have established their brands for the patented technology by the time competitors can enter the marketplace, and can use those brands as platforms to fund and launch their next generation of patented inventions. Still, despite this leading role of patents in business strategy, in addition to their various other valuable roles in innovation and collaboration, patents and patent strategy are practically absent from leading business strategy texts. This book intends to address that absence by providing a business strategy text where patents are up front and center, and then explore some new territory in strategy that has so far been little discussed in business circles.

This book, although it is centered on patents, combines business strategy with legal strategy and classical strategy (political, military, and survival strategies associated with the human condition) to create a comprehensive picture of all aspects of a company’s power to advance its products and services into the marketplace. This reflects the nature of patents as documents on one hand concerned with the minutiae of individual inventions and on the other hand often the drivers of multibillion dollar flows of economic value from the sale of products, services, and companies. Patents are macro and micro simultaneously. The flow of fortunes can depend on the interpretation of just a few words within a patent’s claims.

Further, an underlying theme of this book is the race of decision cycles that determines business tempo. Companies use tempo to succeed in highly contested but valuable fields by proficiently executing strategy at a pace faster or slower than competitors can cope. The competitive dynamics of business are currently as tough as they have ever been, and will likely grow tougher as more and increasingly capable companies enter the marketplace from the diverse global economy. Using tempo to outpace the competition is an important way to address this challenge.

To illustrate the ideas presented in this book, I draw from many sources both inside and outside the business world. This approach is in keeping with an insight I gained some time ago when I was in the Army. That insight is that new ideas and change originate at the borders. In the Army, borders typically meant where countries and cultures came together. In this book, borders mean the linkages in thought between different professional disciplines, different functional entities within organizations, and in some cases, different sciences. My own career has very much resided at the borders of many professional disciplines as a provider of products or services that solve problems. Throughout most of my career, I have been paid to create, sell, and implement solutions. I believe I have succeeded here by stepping into the shoes of my customers, learning how they perform their jobs and then helping them to perform their jobs. Nothing allows you to solve problems better than experiencing and developing your solutions from the point of view of your customers.

I have had a unique opportunity to work with some of the best-performing people in many professional disciplines. These include top lawyers in the legal profession, top business people in the professions of business, top military professionals from all service branches, and top scientists in research and development professions. I have also worked with top intellectual property managers who tend to have at their root one or more of the aforementioned four professions, and whose job entails helping people from all backgrounds to benefit from the patent field and intellectual property as a whole. Intellectual property managers also work at and cross the borders between professions and can readily be both identifiers and creators of new ideas and change.

My own entry into the intellectual property field started by accident at a crossroad between careers. In October of 1993, I made what I thought would be a short career pit stop out of the financial industry. I found a sales position at a patent information company, Derwent Information, where I planned to work until I sought a full time MBA that following September. The move to Derwent Information provided me with the unanticipated benefit of having free access to the Derwent World Patents Index (DWPI). The DWPI was the main product that I sold to Derwent Information customers.

The DWPI is a proprietary and indexed collection of several million global patent abstracts that, in the 1990s, only the largest companies could afford to use on a regular basis. Having free access to this database meant that I could run statistical experiments on the data within the DWPI that would have been cost-prohibitive for Derwent Information customers to perform. These experiments greatly accelerated my learning curve as a new entrant into the intellectual property industry. By February of 1994, I gave my first patents and competitive intelligence presentation to Becton Dickenson in New Jersey. That presentation attracted most of the company’s legal counsel at that office. Within two months, I gave the same talk to three other major companies. Recognizing an opportunity, I arranged to seek my MBA at night and stayed in the patent information industry.

My time in the patent information industry has offered many challenges. Overall, it has been an exciting and rewarding 15 years during which I have had the opportunity to meet and work with many great people and to travel around the world. In my field, I have worked with people in all the major positions associated with patent strategy. These include CEOs, heads of research and development, corporate counsel, outside counsel, intellectual property managers, individual inventors, all manner of consultants, competitive intelligence professionals, licensing executives, accountants, investment bankers, corporate librarians, patent searchers, patent analysts, patent agents, patent liaisons, and salespeople.

I learned a number of things along the way. One is the limited utility of knowledge as a business tool unless that knowledge draws people to important solutions to their problems. A second is the high utility of one area of professional knowledge—the fundamentals of strategy—in creating the insight needed to understand problems, see opportunities, and find sought-after solutions. A third, which stemmed from the previous two, was a complete disassociation from binary thinking of black and white, good or bad, competitor or facilitator, in that almost every event, organization, and person ultimately is a little of both.

These three insights would come into play when the time came to write this book. First, patents, as quantified knowledge, provide their greatest value to the extent that they solve real problems and therefore draw people and resources to their owners and implementers. Second, patents, by affording their owners the right to enforce exclusivity on inventions, provide a tool from which to execute fundamentals of strategy as they apply to business. Third, patent strategy occurs in a world shaded in gray where patent positions are rarely either totally competitive or cooperative in regards to other patent owners, and where any patent owned by any entity may serve as a tool to advance your own business, if you properly manage the conditions that can make that so.

In 2005, after a short hiatus from the intellectual property field and into the defense and healthcare world, I met Dave Hunt, CEO of Landon IP, Inc. Landon IP, Inc. at its core, is a patent search and information company that is often tapped upon to do much more for its customers in order to identify research and development opportunities and prepare for patent litigation. Dave needed someone who could address these more involved projects for Landon IP, Inc. Our work complemented each other. Landon IP, Inc. offered an unparalleled pool of technology experts from which to draw in order to create project teams to turn ideas into results.

My work for Dave has been various, and has ranged from the highly strategic, such as pioneering Landon IP’s entry into Japan, to the highly tactical, such as market development and lead generation. Along the way, I have had the opportunity to give patent strategy courses and run innovation workshops for some of the best and the brightest people in the business. Dave has been gracious in allowing me the time and opportunity to prepare this book. This book has been a long-term personal goal since I became acquainted with this industry.

Much of the material in this book has been refined over the last three years at Landon IP, Inc. through seminars and workshops we have given at customer sites and through patent strategy courses I taught at Patent Resources Group. All of this material has been used in practice by Landon IP, its customers, or both, and in fact stems from solutions devised for real world problems. The material has been developed specifically for patent strategy based upon fifteen years of working with people at over one hundred major corporate intellectual property centers worldwide. These intellectual property centers have shown us both the best and worst practices of practitioners of the intellectual property arts and sciences, and their consequences to business. One of the universal signs of success that we saw was the capacity of winning patenting organizations to outpace their competitors from many different angles so that they, not their competitors, have the greatest influence on the market situation. That led to the title of this book.

As a last note to readers regarding the many case examples in this book, because many of the case examples have a legal component, there are always confidential details about the intended strategy of the participants that I or any other outsider could not access. So these cases are observations based upon the information available to me at the time of writing. In any real life event, there is always what apparently happened and what really happened, and often only the insiders will ever know the latter. I learned about this in real time from a question on my last MBA final exam. The question asked why the ROLM telecommunications merger with IBM failed. Since I worked at ROLM during that time when IBM sold ROLM to Siemens, I knew a lot about what really happened, down to the influence of personalities and personal agendas in the situation. I answered the question as such, and proceeded to have the entire answer marked wrong by the professor, at least until I had the opportunity to explain. So if you are an insider on any case example that appears in this book, I would love to hear more that you can disclose about what really happened if it is appreciably different from the presented interpretation shown here for future updates of this book.

Acknowledgments

I have been making notes on topics that would appear in this book since my time with the 101st Airborne Division starting in 1987. I had the good fortune to become acquainted with the intellectual property industry shortly afterward because it allowed me to draw on and develop a diverse range of skills, from classical strategy up to the latest in innovation sciences. To list everyone who has influenced my work on this book, therefore, would take many pages. I would, however, like to offer special thanks to Dave Hunt, the CEO of Landon IP, Inc., who afforded me the time and the platform from which to write this book. Dave has a strong sense of how to run a business, and he has grown Landon IP, Inc. from a company of 9 people to a company of nearly 200 during the past 10 years. He has shown the courage in business to try new ideas and the willingness and skill to make the adjustments needed to see those ideas succeed.

I would also like to offer a special thanks to Marshall Phelps, Corporate Vice President, IP Policy and Strategy at Microsoft, and Brad Olson, Counsel at Dickstein Shapiro, who I asked early on to peer review the first draft of the final manuscript. They did two things that were very helpful. To start, their business and legal advice was first rate and key to my efforts to tighten and refine the messages in this book. Second, their phenomenally fast turnaround with their reviews provided me with a critical window of opportunity to research their suggestions and put them into the book.

In addition, I would like to thank José Jimenez, Jeff Hovis, Paul Gardner, Mark Connolly, Tony Handel, Ed Kahn, and my father Robert Cantrell all of whom provided me with great insight and advice on important matters in the text of this particular manuscript. José Jimenez is the Chief Intellectual Property Counsel at AMS Research Corporation who reviewed the manuscript and provided insight both on where I could tighten the manuscript and where I made important points that I could further emphasize. Jeff Hovis, the Managing Principal at Product Genesis, reviewed the main body of the text. Jeff both offered important new advice and confirmation regarding important refinements suggested by earlier readers. Paul Gardner is the Academic Director of Patent Resources Group and Mark Connolly is the Global Director—Patents & Intellectual Property at DuPont. Both reviewed the Orientation section of this book, which is a patent primer for business people suggested for inclusion by Marshall Phelps. Tony Handel, Partner and patent litigator for Thomson Hines, and Ed Kahn, consultant on the business side of intellectual property, have both participated with me in giving patent strategy courses through Patent Resources Group and have both influenced this material directly. My father, Robert Cantrell, is a retired IBM executive on the sales and marketing side who also has extensive experience in international operations with Siemens. He read this material from the perspective of someone with absolutely no background in patents so that I could clarify anything that might not make sense to people outside the industry.

I would like also to thank my colleagues at Landon IP, Inc. and Patent Resources Group, with a special note of appreciation to Jeremy Hargis, as well as to Debi Dandridge and Susan Mathis. Jeremy Hargis is a Patent Search Trainer at Landon IP, Inc. who worked in intellectual property management for the automotive industry. He conducted a deep and contributory editing to the first draft of this book based on his day-today experiences in industry. This was no small task, which he performed over several months between his primary duties. Debi Dandridge and Susan Mathis from Patent Resources Group also made several reviews of the text for editing purposes leading up to each of the Patent Resources Group courses, in which earlier drafts of this text were used as course material. I would also like to offer my thanks to the many customers and colleagues with whom I have worked on matters outside this book, several of whom because of their corporate policy cannot be named here but who certainly influenced the material inside.

I would last like to offer my gratitude to the late Col. John Boyd, Air Force fighter pilot, and later classical strategist, who I have never met but who I feel I know and whose ideas have also greatly influenced this work. A colleague of mine, Richard Taylor, from Taylor Rodgers, introduced me to John Boyd’s work when he saw a commonality between Boyd’s papers and my first book, Understanding Sun Tzu on the Art of War. Boyd’s work, his own published intellectual property, accelerated my work going forward and allowed me to complete this book expeditiously. We have all been students of the work of Sun Tzu, a famous Chinese classical strategist from 2,500 years ago, whose teachings and wisdom have stood the test of time.

About the Author

Robert Cantrell is a strategist who has contributed ideas and observations to a wide range of professions that include intellectual property, the focus of this book, as well as military, innovation, sales, and the biological sciences. He heads the intellectual property consulting effort at Landon IP, Inc., one of the largest privately held patent search, analysis, and consulting firms in the United States. Robert holds a BA in Biology and Military Science from Duke University and an MBA from Edinburgh Business School, UK. He served as an infantry officer for the 101st Airborne Division of the United States Army. Robert has an extensive business development background that includes employment at IBM/ROLM, Dean Witter, Derwent Information, and Manning & Napier. Robert is currently a member of the Intellectual Property Owners association and the Licensing Executive Society. He is a previous member of the Society of Competitive Intelligence Professionals, and spent two years on the board of the United Professional Sales Association. Robert lives in Alexandria Virginia. His favorite hobby is shark photography.

Orientation

Patents are a key driver of business growth for companies that rely on research and development to create the products and services they sell. They provide an incentive to innovate by affording the means to secure and advance inventions in contested technological fields. As such, they are at the center of a discussion on business strategy that will follow. Before we begin with this discussion, however, there are a few things you should know about patents. Even if you are already familiar with patents, your review of this material will help to align our orientation on the subject.

The Grant

To start, you should know that a patent is the grant of the right to exclude others from making, using, or selling the claimed invention for the life of the patent within the jurisdiction of the granting patent office. A granted patent is most often sought by people applying for a patent either because they plan to enforce the exclusivity of their claimed invention or because they want to maintain their freedom of operation by preventing a competitor from obtaining a patent on that same invention first. For the latter, simply applying for the patent can prevent a competitor from obtaining a similar patent by establishing that invention in the public domain as prior art (an already existing invention). In order to make the former purpose useful, the patent owner needs to be willing to enforce this granted right to exclusivity, or present to the world of potential infringers a credible expectation that patent enforcement will occur if they do not otherwise establish suitable arrangements with that owner. Having the patent itself, and the willingness to enforce the right to exclusivity it grants, however, does not guarantee that its owner will actually succeed when enforcing that right, or even have the capacity to enforce that right if challenged by an infringer of the patent’s claims.

At any time during the life of a patent, a second party may, by accident or design, infringe on the claims covered by the patent. The term “infringe” means that another party has made, used, or sold an invention claimed within the patent in violation of the patent owner’s rights. This infringement in itself is a matter on which two parties may disagree, provided that the patent owner even discovers the infringement. A disagreement can arise about whether the invention of the alleged infringer actually infringes on the patent claims or whether the patent owner should have the rights to the patent claims as granted.

Since the claims of a patent are open to interpretation, ultimately by a court of law, the granted patent really offers its owner only a right to exclude, based on the presumption that the claims of that patent can be enforced. Furthermore, both the owner of the patent and potential infringers may assess the probability of successful enforcement on the part of the patent owner differently. That difference in assessment is one of the factors that leads to patent disputes, because it necessarily means that the relative value of the predicted outcome of a patent challenge for each party will not be the same. If both parties view their chances of winning as high, regardless of the ultimate truth of the matter, the risk of conflict is correspondingly higher than it might be if opposing sides had more accurate views of their relative positions.

The actual value associated with the probability of successful patent enforcement to two or more involved parties will generally be reconciled monetarily at the time of a transaction, settlement, or court judgment involving the patent. At any other time in a patent’s life, its present value is based on the probability that it can successfully be enforced, and that will further vary considerably depending on the capacity of owners or licensors to enforce the patent and commercially exploit the invention it describes. Whether this probability is closer or further away from the value desired at the time of a transaction, settlement, or court verdict may very well depend on the relative skills of the negotiating teams involved. The patent owner will also receive value indirectly from any infringements on inventions that did not occur because a potential infringer respected the patent claims and the patent owner did not actually have to enforce them or even know about the threat. The sum value of the patent will further depend on the following:

• The quality and coverage of the patent itself

• The quality and coverage of other patents and associated intellectual property within the patent’s sphere of influence

• The quality of the legal counsel charged to enforce the patent

• The way the patented invention is used in the market

• The resources available and employed to support any enforcement effort

• The quality of all aspects of the opposition

• The particular court (and jury, if any)

• The enforceability of patent laws within the jurisdiction covered by the patent

In short, anyone involved with patents has a lot of variables to consider and uncertainties to address to make those patents both valuable and useful.

With all variables and uncertainties considered, the stakes in any challenges to a patent’s claims are often high, and the process to enforce them is often both expensive and risky. Enforcement is also not a one-sided matter, since a given patent owner may have the same propensity to challenge the claims of a competitor’s patents as that competitor may have to challenge the claims of that patent owner’s patents. In fact, the measure of a patent owner’s capacity to both challenge and defend patents is often the key determinant in whether that patent owner can maximize the value of patents in the market and mitigate or avoid the harmful effects of patent disputes.

Because patent enforcement is both expensive and risky, you, as someone involved with patent strategy, will generally prefer strategies that encourage competitors to respect your patent claims without actually challenging them, since that means you can focus your efforts on advancing the business and not on patent litigation. An exception to this tendency is found within a few businesses or departments of businesses designed and funded specifically to challenge patents. With the majority in mind first, the reason that enforcing patents is both expensive and risky and generally a distraction is that the process can play out as a business equivalent of war, albeit and fortunately fought with money and careers instead of actual lives. Wars are often expensive, even for the winners. That patent disputes can play out as the business equivalent of war relates to the fact that the practice of law itself, of which patents are a part, has its origins in history as a means to resolve disputes by some method other than the sword. But that enforcement is often only one step removed from more physical and often even more costly means of creating a resolution.

Patent law, like law in general, exists to create order in the affairs of people and organizations covered by those laws so that people comply with rules they might otherwise ignore in the absence of potential consequences for breaking those laws. These consequences can be significant in that they may decide the flow of millions to billions of dollars. Any organization that might deliberately or accidently infringe on another’s patent claims or that might decide whether to undertake the enforcement of a patent’s claims, needs to be concerned about all manner of potential consequences in order to balance the risk of infringement and enforcement with the potential reward. These consequences also should be weighed against any imbalances of risk that may occur between the involved parties. Regardless of whether you are challenging or defending a patent position, you will generally prefer to bear less risk than your opponent.

Patents, as legal documents, provide a tool to establish some order regarding the ownership and use of inventions that the owner would like to see enforced, namely to prevent the unauthorized making, use, or sale of the inventions described within a patent’s claims by parties that have not properly obtained the right to make, use, or sell those inventions. The owner of an invention invests in patents specifically because patents help that owner to mitigate the pressures of nonexclusive competition, meaning that the owner can, through the successful enforcement of the patents, exclude people from making, using, or selling claimed inventions or require people to pay premiums, royalties, or some other form of remuneration that they might not otherwise pay to make, use, or sell the inventions in the absence of the patents.

In exchange for the rights granted by a patent for a period extending up to 20 years after the filing of a patent application, the patent carries with it an explicit agreement within the jurisdiction of the patent-granting authority that the owner will disclose the details of an invention within the patent application and associated documents for the benefit of the public. From this disclosure, society as a whole can study the invention and use it to spur new creative efforts for the future. Because of this agreement, the primary value of a competitor’s patent to you can be the knowledge it gives you without your needing to recreate that knowledge yourself. That knowledge could help you to determine your own research and development direction, or you might access it more directly through a vehicle such as a patent license or through the purchase of a product or service that uses the invention.

The key to understanding any given patent is to understand the scope of the invention claimed by that patent, the jurisdiction (country or countries) that the patent covers, and the length of time remaining before the patent expires. These are also the three elements around which many patent disputes revolve. Patent counsel, depending on its role to support the plaintiff or the defendant in a case, may argue about the scope of a patent’s claims and whether or not any infringement on those claims has actually occurred. Patent counsel may also argue about the validity or invalidity of the patent claims themselves. Patent counsel will take into account the jurisdiction covered by the patent and also the jurisdiction of the court that hears a patent case, since the probability of successful patent enforcement will differ from place to place. With that difference in mind, jurisdiction has two sides to it, given that a patent can afford the right to exclude a competitor from making an invention in a given patent jurisdiction and can also afford the right to exclude products for sale or use in a given patent jurisdiction, even if they are legally made outside the jurisdiction covered by the patent. This last point is important to understand when you talk through where to seek patent protection with your patent counsel. You do not necessarily need complete global patent protection to achieve the level of global patent protection that you require on a given invention.

Regarding patent expirations, while the life of a patent can be extended under certain conditions, this is an exception to the rules. Such exceptions, which can, for example, be granted to restore time lost from a patent term while a drug awaited regulatory approval, can also be at the center of patent disputes. Naturally, in this example, the interests of the pharmaceutical companies to extend patents in whole or part is usually opposite to the interests of generic drug manufacturers that want to put generic drugs onto the market as soon as possible. In any case and in all industries, considering all aspects of disputes, patent expiration is an important determinant of the value of proceeding with an enforcement or challenge effort, because it determines how long the benefits of having a patent can last. The cost to the business of that enforcement or challenge effort would need to be covered within the remaining life of the patent, keeping in mind that cost can go beyond money to include other factors, such as the reputation of the business in the minds of potential customers. The length of time remaining until a patent expires is also a factor in determining the value and nature of licenses and remuneration resulting from a patent dispute.

Jurisdictions and Costs

Further to understanding patents, you should also know that a single given invention might have several patents behind it from several different patent authorities. For example, it might have a U.S. patent through the U.S. Patent Office, a Japanese patent through the Japan Patent Office, and a European patent covering a collection of European countries through the European Patent Office. Patenting in many patent authorities affords you the opportunity to enforce invention exclusivity within all the jurisdictions covered by the granted patents. This comes, however, with an attendant higher cost to gain and maintain those patents than if you filed for a patent in just one authority. Furthermore, each patent authority has its own variation on patent laws, meaning that just because you succeed at enforcing exclusivity in one jurisdiction you will not necessarily succeed at enforcing exclusivity in another. The scope of claims and the date of expiration for patents on the same underlying invention from different authorities may vary for the same reason. As a rule, you will seek patents in the countries that are major markets for the business and will consider also seeking patents in countries that are major manufacturers when such patents make sense for your strategy considering the potential value of the invention and the expected enforceability of the patent in each jurisdiction.

The monetary costs associated with patenting also differ by patent authority. In the United States, $10,000 to $25,000 is a common figure for the cost to obtain a patent, inclusive of filing fees and the use of a patent attorney, although as noted to the author, in some industries that figure can fall into the $25,000 to $50,000 range per patent. Other patent authorities have similar costs, meaning that if you file for patents in Japan and Europe, you might add another $15,000 to $20,000 or more each to your total. These costs are variable and depend mostly on the technology and its complexity, the patent authority, the number of claims sought, and the cost of retained legal counsel.

Additionally, each patent authority will have a schedule of patent maintenance fees that also differ by patent authority and by the number of claims in the patent. Added up, to obtain and maintain global patent protection for an invention can cost more than $100,000 over the life of the family of patents that protect it. (“Patent family” is used herein to refer to the collection of patents from multiple patent authorities directed to the same invention.) For any given invention, therefore, it is important to appreciate these costs in order to determine whether having the right to enforce the exclusivity of a claimed invention is worth the cost in each sought-after jurisdiction.

When determining the cost and potential benefit, also keep in mind that the cost to actually enforce patent exclusivity can completely eclipse the cost of gaining and maintaining the patent itself if you cannot otherwise establish an amicable settlement or mutually beneficial license to end a dispute. An analysis presented by one prominent law firm head-quartered in the United States stated that, at the time this book was being written, for cases with more than $25 million at stake, the average cost of patent litigation is $3.2 million through the end of discovery and $5.2 million through trial.1 All these determinations on cost are made all the more difficult, because typically you have no guarantee that an invention will have real or continued value in the future, or whether the patent or patents behind it will ultimately stand up in court.

People accept the costs of patent litigation because the stakes involved are so high and the uncertainty of patent coverage and enforceability leaves open a possibility of succeeding through proper legal maneuvering even in less than perfect cases. This latter point is important to understand, because if all parties knew the exact rights the patents in a dispute afforded, they would know the outcome of any legal contest in advance and could respond to that outcome without the expense of the litigation.

Uncertainties

Managing the costs associated with patenting and enforcing patents is one of the key balancing acts that patent strategists need to perform. If, as someone involved with patent strategy, you spend too little on any or all things associated with patent protection, you can make your supported organization vulnerable to competitors. If you spend too much, you can overly tax other important efforts that your business intends to pursue and again make your organization vulnerable to competitors, albeit in a different way. You also need to balance your actions against who your competition is. As a small start-up, you cannot generally expect to go head-to-head against Microsoft, Hewlett-Packard (HP), Merck, or any other patent powerhouse in a patent arms race if they choose to invest in your line of research and development. In contrast, if you are a patent powerhouse, you have the collective patents of all the start-ups and all the other major and minor players to consider. So no matter who you are, you need both efficiency and creativity to get the most out of the resources you have and to deal with uncertainties inherent in the process of leveraging patents.

Leading the list of uncertainties, and to reemphasize the point about uncertainty, you simply cannot guarantee that a given patent will work as a tool to enforce the exclusivity of an invention until that patent is actually used to enforce the exclusivity of that invention. That uncertainty underpins a number of decisions the patent strategist needs to make. So while making those decisions, the adept patent strategist will often leverage this uncertainty as an advantage since it also affects competitors. For example, the threat that you, as a patent owner, can enforce exclusivity on an invention often has more power than the act of actually enforcing that exclusivity, given that once challenged, your competitor could find a way to defeat your patent claims, eliminate your threat, and cause you to spend a small fortune in legal fees during the process. Oftentimes, you might posture with the threat that you will enforce exclusivity so that your competitor will determine that, even given the best possible outcome of a patent challenge, the risk and expense to challenge your patent position is too high a risk to take. So this management of uncertainty is at the heart of succeeding with your primary purpose behind investing in a patent—the right to enforce exclusivity on claimed inventions, without needing to use the patent in an actual court of law. The proactive use of uncertainty is therefore essential in keeping the costs of patenting and patent enforcement manageable.

Due to the uncertainty and expense of patent enforcement, any decision you make to enforce a patent should be a well considered decision. Patent claims may be interpreted differently by a court from what the patentee intended. Claim interpretation will depend on how well the patent was drafted, the relevant prior art (technology that was in the public domain prior to the invention), the comparative skills of those attorneys and other professionals supporting or opposing your position, and the makeup of the particular court. Despite the precise requirements of patent drafting itself, superior patent drafting is an art form the success of which is difficult to prove until tested, and enforcement of claimed inventions, itself another art form, involves any number of variables that could weigh in on the success or failure of the effort.

Patent Claims

Central to drafting an enforceable patent are the claims. Most patents have several claims, some of which are independent of other claims and some of which are dependent on (build on) preceding claims within the patent. Their interpretation is further influenced by patent specifications and drawings. Each patent claim is directed to a specific invention or aspect of an invention that the patent covers. So if we can, for illustration purposes, clean the slate of all past and present inventions and allow you to draft the patent for the first wheel, you would first draft a claim that covers the major embodiment of the wheel itself. This would be an independent claim that broadly describes the core wheel. Subsequent claims within the same patent that are dependent on the claim for the wheel might include additional embodiments of the total invention that makes the wheel useful, such as the axle, itself a type of wheel, or spokes.

Given this invention of the wheel, the job of your patent prosecution attorney (the attorney responsible for obtaining granted patents from a patent office) is to draft patent claims that allow you to enforce exclusivity on the wheel. If drafted thoughtfully, these claims will cover not only your primary intended use of that wheel, but ideally will cover ample uses outside the scope of that original intent so that your patent could also, for example, become a vehicle to license the wheel invention for other uses or set up new businesses using the wheel concept. You also want your patent prosecution attorney to draft claims that do not knowingly leave unguarded important technical elements that make your invention of the wheel useful. A wheel has limited application without an axle, which means that along with being able to enforce exclusivity on the wheel, you want to either be able to enforce exclusivity on the axle or at least have the freedom to use axles as you require.

This last point on freedom to use, often expressed in legal terms as “freedom of operation,” is an important nuance to understand in patent strategy, because the other side of enforcing exclusivity for your patents is to seek a position where a competitor cannot enforce exclusivity against you. Sometimes just having the freedom to make, use, or sell an invention without restriction is the single most important (or a more important) requirement in your patent strategy for a given invention than having the right to exclude other people from using that given invention. You do not need a patent to establish the freedom to make, use, or sell an invention, because just publishing the specifics of an invention in an appropriate journal, or using an invention within a product, can prevent a competitor that does not otherwise have invention or filing priority from obtaining a patent on that same invention. (Priority is defined as an earlier claim to the invention; in the United States, priority is determined by who was first to invent, and in most of the rest of the world priority is determined by who filed a patent application first.)

Regarding the patent claims themselves, it is desirable to have claims of broad, intermediate, and narrow scope in order to maximize patent protection. Keeping with our illustration, a broad claim might cover the entire wheel, whereas an intermediate or narrow claim might cover some part of that wheel, such as the axle. This, too, is a matter of perspective since, considering all the potential inventions that could be components of an axle, a patent on an axle would be considered quite broad in relationship to those components. Seminal inventions in a given industry often allow for the broadest possible scope of patent claims, as per our example with the first wheel. If you in theory had invented the first wheel ever, your claims might cover just about every application of a wheel imaginable for which you could enforce those claims over the life of the wheel patent. Over time, once your wheel patent expired, you might still obtain new patents that include wheels, but on a narrower scope. For example, your patent might claim as an invention installed wheels on a suitcase so people can roll the suitcase instead of carrying it. Whereas such an invention might have infringed on a granted patent that claimed the wheel itself, it would do so only if that wheel patent had not yet expired or if you had not already obtained a license to the wheel suitable for your purpose with the suitcase.

As your patent application on wheeled suitcases progresses through the patent office, you might ultimately obtain a patent claiming wheeled suitcases at the same time another inventor claimed the use of wheels to create a conveyer belt. While the conveyer belt can also be used to move suitcases without needing someone to carry them, it would not violate a claim directed to a wheeled suitcase as an invention. But considering all possible competition, in general, your claims should be broader about what constitutes a wheeled suitcase rather than narrower, so that your patent litigation attorneys can argue broadly about what constitutes wheels on a suitcase. You do not want your broad claims to restrict the scope of your patent to some specific configuration of, say, two wheels, which might allow someone else to claim in another patent the attachment of a third wheel to a suitcase that would allow a person to roll a bag while it stands up on its own. Bottom line here: The claims are the central part of a patent that determine the invention, in whole or part, for which you have the right to enforce exclusivity. They are also the part that an opponent will most likely seek to challenge. Adequately broad and enforceable claims are desirable, as are intermediate and narrow claims. These factors, relative to your own invention and the current state of the art in technology, should be a part of your discussion with patent counsel.

Eighteen Months of Secrecy

The patent system has one uncertainty inherent in its design that arises from the patent application process itself. During the examination of a patent by most patent offices, the patent application remains secret for a period of 18 months. After that time, the patent offices publish those patent applications, regardless of whether they ultimately grant the patent itself. (The United States used to be an exception to this rule, and is still an exception in the sense that the U.S. Patent Office does not mandatorily publish after 18 months those patent applications filed only in the United States.) As someone involved with patent strategy, this 18-month window of secrecy can prove to be highly important for a number of reasons.

On the positive side of the 18 months of secrecy, it can create uncertainty for competitors about whether you have pending patents on inventions they would like to use or patent themselves. Competitors always run the risk that if they make, use, or sell a new invention, they might find out later that you have a priority patent application on the same invention, which might ultimately become a granted patent. This would leave those competitors in the position of infringing on your patent, along with the potential consequences for doing so. You can stoke any fears they may have about the potential consequences of infringing on the claims described within your potentially pending patent applications through the selective publication of invention disclosures and scientific papers. If at least some of the time you have pending patents behind your invention disclosures and scientific papers, any invention you disclose in any way, even those for which you have not sought patent protection, would still represent a potential infringement threat to competitors until after they wait 18 months to see whether corresponding patent applications appear. This dynamic will become important at the end of this book when we discuss a high-tempo patent strategy that leverages psychological means to protect inventions.

On the negative side, the 18-month window during which patent applications remain secret also creates uncertainty for you regarding potential competitive patent claims that could, in the future, affect decisions you need to make right now. Because the surest defense against patent infringement is to not infringe, reviewing the prior art before making a patent-related decision can make a lot of sense, except that this 18 months of secrecy means that no matter how careful you are, you always run the risk that you might be too late to obtain a patent of your own on an invention, or that you might infringe on patent claims that you did not and could not know about at the time. Due to the potential cost of the latter and often unavoidable mistakes, it is always important to have contingency plans in place should you run into an infringement situation that could include predetermined cross-licensing arrangements with competitors working on similar technologies. The risk of not doing so is high, because knowingly infringing on a competitor’s patents can be more costly than accidentally infringing on a competitor’s patents once you realize that an infringement has occurred. Treble damages come up frequently in U.S. courts for willful infringement, which is a term for knowingly infringing on a competitor’s patents.

Requirements to Obtain Patents

The last part of our orientation addresses the requirements to obtain a patent. The first requirement is to have an invention that meets the given patent authority’s legal definition of novelty. As with other aspects of patenting, this definition of novelty can differ by patent authority. U.S. patent law, unlike the patent law of the rest of the world, permits an applicant to obtain a valid patent so long as the patent application is filed within one year of the first publication, disclosure, or sale of the invention. In many other patent authorities, such as in Europe, even a disclosure of an invention to a potential business partner without proper nondisclosure documentation in place could cause an immediate forfeiture of the right to seek a patent within that authority. As explained to the author by a member of the European Patent Office, if you theoretically invented the first balsa wood glider and decided to test fly it in a park where other people could see it, then you would lose novelty for that invention since your test would be considered a public disclosure.

It is therefore important to discuss any invention disclosure with patent counsel in order not to lose the opportunity to obtain patents in patent authorities where you would like to seek patent protection.

A second requirement is usefulness. Usefulness means that the invention should afford some benefit to the person or persons who employ it. Usefulness also has different interpretations in different patent authorities, with some having a higher bar for usefulness in and apart from industry than others. In other words, different patent offices may view differently the usefulness of a given invention that is operative only a small percentage of the time under specific conditions. It is important to appreciate just what is considered useful by a given patent authority and to support that argument in your patent application documentation.

A further requirement to obtain a patent in the United States is that the invention be an unobvious variation of that which is in the prior art. Other countries outside the United States have a similar requirement couched in terms of demanding that technology for which you seek patent protection incorporate an “inventive step” rather than be “unobvious.” For example, if you theoretically patented a headlight on a car, then a patent examiner might reject a patent for a headlight on a motorcycle by a competitor as being obvious (or lacking an inventive step) in view of your prior car headlight patent. It is important here, however, to understand that even if a patent examiner decides your claims on an invention pass the obviousness test, the court may not agree with that decision if someone challenges your patent in the future, nor should you ever assume that you cannot challenge any aspect of a competitor’s patent if you have the evidence and skills on hand to support that challenge. Obviousness, as one of the points to challenge a patent claim, is also something to consider when drafting patent claims, since ideally you and your patent attorneys will have the insight to describe obvious applications of an invention such as, in the example, a headlight on vehicles other than the claimed car so that such an obviousness case would not become an issue.

Continuing with requirements to obtain a patent, since each patent authority has its differences, it is prudent to draft claims, supporting text, and drawings of the invention in accord with the requirements of each respective authority in which you seek patent protection. Sometimes that can include translating the patent application into the language of each authority. In addition, the drafted patent should include details of ownership and follow the guidelines of each patent authority as to who all the contributing inventors are. Any failure to prepare documents properly could lead to either a failure to obtain a patent on the invention or to a failure in enforceability if you have left open a legal detail for a challenger to exploit. Any failure to draft proper patent applications on the part of your competitor can also open opportunities for you.

Conclusion

We have presented some basic facts about patenting and patent strategy that you should know. You should further consult proper patent counsel to put patent strategy into practice, if you yourself are not qualified patent counsel. That patent counsel can fill you in on the details of your particular inventions and cases so that you execute the legal fundamentals well. That stated, although a patent strategist should always consider the strategic advice given by patent counsel supporting the situation, the final say on the who, what, why, when, where, and how of patent strategy rests with top business officers. That is not to imply that the patent strategist cannot also be patent counsel, a top officer in the business, or both. As this discussion of patent strategy develops, it will show that ultimately, whoever that person may be, important decisions involving patents should come from the person or persons responsible for the overall success of the business. These important decisions lead us now to the broader discussion of patent strategy and its role in the strategy of business.

Chapter 1

Introduction

In today’s technology-driven markets, most companies compete through ideas and relationships. Their most important assets are their intellectual property, knowledge, and people. Patents, as the most quantifiable of intellectual property assets, are the cornerstone of a new type of business strategy that, while practiced, has not been adequately described. This book intends to provide that description and to take the mystery out of patent strategy for business management.

When compared to marketing or financial strategy, patent strategy in business has barely been touched on as a professional discipline. Because of this, patent strategy presents a significant opportunity to gain a competitive advantage. Whereas an opportunity for financial arbitrage can have a lifespan of seconds before astute financial strategists notice and act, opportunities for arbitrage on the value of patentable ideas can remain open to discovery for years. An astute patent strategist can expect to find and create value far in excess of the investment required to capture that value, if for no other reason than that the patent field is less understood than other areas of business. In the patent field, all the treasures have not already been discovered; they may yet be hidden in the patent files of a company or more likely, in the minds of brilliant researchers waiting for the right connection of ideas and support.

Treasures in the patent world are both buried and emergent. This book focuses on the emergent treasures: the creation and acquisition of valuable inventions from bright people. This is in keeping with the fact that the vast majority of wealth generated by patents is gained from the patents used in a company’s core business. Much has been discussed in professional circles about licensing non-core assets buried in the patent portfolio, and tangential value here should not be overlooked, but the fact remains that the primary value is emergent and in the business core.