Building Value and Strength through Patenting: A Starting Point for Weighing the Benefits
By Andrew Pratt
Partner, Venable LLP
Innovative businesses compete in crowded marketplaces where unprotected inventions are quickly copied and sold in direct competition with the innovator’s products. While many factors can affect a company’s success in the marketplace, patents—or the absence of them— can sometimes be the difference between thriving or merely surviving, or worse.
The need to patent may be clear, but less obvious is how any particular company can strategically leverage patents to enhance its competitive position. This article focuses on what patents are, how they are used, and a few basic strategies to build from. The concepts have general applicability to all major markets and patent systems, including both Norway and the United States, but is written from the perspective of the United States market and patent system.
What is a patent, fundamentally?It seems like a basic question, but misconceptions abound. A patent gives its owner the right to exclude others from exploiting the patented invention during the life of the patent. The right is given by a government in exchange for the inventor disclosing and dedicating the invention to the public following the patent’s expiration. These rights are territorial, and they apply only in the country that issued the patent.
Patents are also property. They can be bought, sold, and licensed. They can be used as collateral to secure financing, and depreciated like buildings and equipment.
When people speak of patents, by the way, they normally are referring to so-called “utility patents”, which are the focus of this article. Utility patents can cover both inventive things, and also inventive methods of doing something. For example, the patented thing could be an inventive molecule. The patented method could be a way of using that molecule to treat disease.
How does one get a Patent?A patent application is submitted to the patent office of a particular country, and a fee is paid. Depending on the specific country the application will have various requirements, but at a basic level it must detail the invention in words and drawings in sufficient detail to demonstrate exactly what the invention is and how it operates. The median time from application to a first issued patent is 25 months in the United States.
The patent must also end with a number of “claims” to the invention, each of which capture the invention with varying degrees of specificity. Generally speaking, a broad claim can cover a relatively larger class of things or methods than a narrow claim that has more limitations. At the same time, a broad claim is more vulnerable to an attack on its validity than a narrower one. The strongest patents often strike an appropriate balance between the two.
How are patents used by businesses?To say that a patent’s usefulness is its ability to exclude others is only a partial explanation. The real power of any particular patent is leverage, which can be used in different ways by different companies.
A manufacturer, for example, can use a patent to maintain exclusivity over an inventive product or process, while its competitors must use alternative and possibly less competitive solutions. Or that same patent could be used by a non-manufacturer to license others who want access to the patented technology.
Patents can also facilitate cross-licensing arrangements where two sides license each other to their respective patents, allowing both to compete more strongly against those who lack a license to the cross-licensed patents. In all of these cases, the leverage of patent ownership helps a company to achieve benefits that would otherwise remain out of reach.
Note that the leverage conferred through patent ownership is generally proportional to one or both of the actual strength and perceived strength of the patent. It is also important to appreciate that, as in poker, a weak hand can sometimes far outperform its objective strength, and vice versa.
What makes an invention eligible for patenting?In the United States, any new, useful, and unobvious invention can be patented. The European systems are similar, but there are important differences. Nevertheless, the similarities are such that companies commonly file a patent application in one country that can be later submitted to nearly any country the applicant desires. A Norwegian inventor or company can, for example, file an initial patent application in either Norway or the United States or another country, and from that initial filing pursue patents around the globe.
What can be patented is not limitless. In Europe and virtually every other major market other than the United States, a patent must be applied for before commercialization or public disclosure. In the United States, inventions that are publicly known or that have been described in publications cannot be patented, but a sale or offer for sale of an inventive thing or method triggers a one-year deadline to file a patent application. In all cases, it is important to be clear on the requirements before proceeding.
Other limitations prevent patenting laws of nature and mental processes. In the United States, moreover, it is no longer possible to patent the use of a computer to, e.g., organize data or carry out transactions or any other such process that could be done mentally or with a pen and paper.
There are also practical constraints on patenting. Patentable inventions are often developed that are simply not worth patenting. It is important to be selective and strategic when placing bets on the inventions that will most benefit the company.
Does a patent also give its owner freedom to operate?Perhaps, but not necessarily. Consider a situation where Company A has a patent on a pencil. If Company B patents the combination of a pencil and eraser, Company B could not produce that product without infringing Company A’s pencil patent. So a patent search and clearance opinion may be advisable before commercializing a new technology. If done early on, it may allow for design changes or other steps to be implemented to avoid problems later on.
What are some patent strategies?There are an infinite number of ways that any particular patent strategy may be played out, but the following basic strategies can provide a starting point.
Innovators often seek to create a so-called “patent thicket” to capture the main invention, as well as variations of it. This makes it difficult for a competitor to employ similar technology without infringing one of the patents in the thicket. An effective patent thicket can force competitors to use competing, but less commercially viable, technologies.
Consider, for example, a patent-thicket strategy for patenting a pencil. A base patent would cover an elongate piece of wood encasing the pencil lead. A patent thicket would further include patents for different shapes, materials, and add-ons like an eraser. Additionally, a method of using the pencil to write and draw would also be claimed. In the end, a competitor would have a difficult time designing a pencil that did not infringe any patent, and the owner of the patent thicket would have a range of design options to exclusively offer. And in answer to patent skeptics, the patent thicket might encourage the development of a beneficial alternate technology, such as a ball point pen.
A “blocking patent” claims an invention that is required to continue development of a technology. In the pencil example, a blocking patent might cover the combination of a pencil and eraser if the pencil innovator had failed to patent that combination. The owner of the pencil patent would be required to pay the other a fee for access to the eraser technology, or would have to devise another solution if a license could not be obtained.
Patents can also be purchased or licensed to gain access to a desired technology.
In conclusion, a decision on whether to patent is a good beginning. With an understanding of some basic concepts, together with clear business goals, a company can begin to make reasoned decisions about whether and how patents will help to achieve those goals and yield significant returns on the investment in patenting.