Investment in IPR Protection?
BY: ANDY TROTT
Imagine the scenario: Excitement is high on Dragons Den as Keith has just presented his fantastically innovative new product. He has shared the business model, which is solid and disruptive, and Keith himself has impressed as an entrepreneur and businessman. More importantly, the product works!
But just as it seems that we are about to witness a dragon bidding war, one of the dragons asks the dreaded question. "Have you patented this idea Keith?". "No...? Oh dear, why not?"
Immediately, the room descends into gloom and the dragons start furiously writing notes, disengaging from Keith's 'rabbit caught in headlights' stare.
Was the dragon right? Should Keith have invested in IPR protection? Well in this instance the answer is simple - yes, Keith should have invested in a patent as it would have resulted in him receiving an offer from a dragon.
But, in reality, this is a much more complex subject, and one which does not have a clear answer.
Why Protect IP?
Obviously, filing for patent protection is a way that the inventor can protect themselves against anyone copying their idea... in theory at least. But whilst this seems simple, it can be difficult to get a strong patent which adequately covers the inventors idea. Often, competitors will 'work around' the patent in order to copy the general product idea without directly infringing the patent. This is normal business practice.
But let's just say a company has a rock solid patent which can't be 'worked around', but still along comes a competitor with a product that is clearly infringing the patent. This should be a clear case of patent infringement right?
Not necessarily. What is obvious and clear to one person, is not necessarily obvious and clear to another, especially when a judge is involved! Judges don't know the intricacies of the design or the specifics of the patent. So this is where the lawyers get involved and it can become messy and very, very expensive!!
Take the case of Apple Inc vs Samsung Electronics Co. In 2007, Apple filed 4 major design patents covering the basic shape of the iPhone, which at the time was totally original and, one would think, would be clear and obvious. But in 2010, Samsung launched the Galaxy S 4G, along with a number of other products, which were strikingly similar to the design of Apple's iPhone. This started the 'Smartphone Patent Wars' of 2011 which lasted 5 years and costed billions of dollars.
This is an extreme case, but it does highlight how complex patent litigation can be. What started out as Apple simply trying to protect their iPhone design turned into a major patent war involving over 50 lawsuits. Samsung's response to the original lawsuit was to use their own patent portfolio to counter sue Apple. This is called the defensive IP strategy.
Defensive IP Strategy
Large multinational companies protect themselves against IP litigation by building a large patent portfolio, often covering hundreds or thousands of patents, all designed to cover the broadest range of areas and technologies. The strength of each individual patent is not of any great concern, what is important is the breadth of patent coverage and sheer volume of patents. The defensive strategy is... 'if you come after us, we will come after you and tie you up in legal battles until you give in'. In this way, if a competitive business claims that the multinational are infringing their patent, the competitive business will be faced with a barrage of counter lawsuits. And so what started as an attempt to protect their intellectual property turns into a backs to the wall defence against a much more powerful competitor. And for a small to medium sized business, the legal costs would probably put them out of business.
In cases such as these, IP protection is of little value and the general rule is, the bigger company will normally win, especially if they employ a defensive IP strategy and hold a large patent portfolio.
So when does investing in IP protection make sense?
Making Sense of IP Protection
Filing for IP protection should be part of a well thought through business strategy, and as it is expensive, it needs to be built into the core business plan. Filing for patents in isolation may work, but it is hugely risky and therefore I would always advocate that filing for patents should be part of building an overall patent portfolio and IP strategy.
So what should a business do?.
Well firstly, you should always keep focused on your long term IP strategy & portfolio and not get emotionally attached to any specific patent or technology your business owns. The portfolio will grow and over time will provide your business with a valuable and defendable asset. But, there will always be competitors who operate on the fringes of what can be considered ethical and/or moral, and in these cases it is easy to let emotions cloud the decision making. Don't let this happen.
Of course, if you face litigation, you must make a clear business decision whether to fight the case or leave it. But get properly advised - litigation costs a significant amount of money and there is no guarantee that you will be able to recover costs, even if you win. The average cost for defending a patent lawsuit is £2.5M.
And if a much larger competitor infringes your patent, you may need to turn a blind eye. Alternatively, you could offer them a royalty free license. In this way, if a smaller competitor also infringes your IP, you can legitimately claim that you already have a licensee, giving credibility as to the strength of your patent.
Defensive Publication Strategy
But there is another perfectly reasonable strategy which I find myself advocating more and more. Rather than building a portfolio and filing for patent protection, you can do the exact opposite by putting your idea in the public domain, giving everyone the ability use your idea. This is called the Defensive Publication strategy.
But why ever would you want to give your idea away?
Well firstly, it does not cost you anything, which means that you can invest your money in other areas of the business. This can be extremely appealing to smaller businesses with limited funds.
Secondly, by disclosing your intellectual property into the public domain, you ensure that nobody else can file for protection of your idea. This ensures that your business operates free of the fear of litigation. Prior art then works in your favour.
And third, and most compellingly, it enables your business to focus on speed to market. Put all your resources into speeding up your business, so by the time your competitors have seen your idea and put their own implementation plans in place, you have launched your product and are now developing your next great idea. Focusing on speed will enable your business to be a few steps ahead of your competitors rather than being worried that they will steal your ideas.
After all, with exponential growth and accelerating disruption, your great idea of today will be history quicker than ever before.