A Google search of the term “patent strategy” in quotes conducted on May 11, 2012, returned no fewer than 188,000 references. A similar search of the terms ‘patent strategy’ without quotes returned 81,000,000 references. Indeed, anyone who reads press releases or financial news can tell you that companies, both big and small, repeatedly talk of developing a patent strategy for the twenty-first century that will enable them to compete in the global market place and take advantage of existing synergies and ongoing alliances in a manner that will create shareholder value and bring new technologies to market.
What a mouthful! Blah… blah… blah! Existing synergies and ongoing alliances? That seems to be code for “we don’t have a clue but want to make it sound like we are doing something to keep our investors/shareholders happy.” And if I hear any more about moving forward through the twenty-first century I think I will be sick to my stomach. For crying out loud, strategies for the twenty-first century are only about a decade (or more) late! Further, anyone who thinks that their company will be dominant, let alone relevant, by the end of the twenty-first century obviously hasn’t learned anything from history. Virtually none of the dominant tech companies remain dominant for more than a generation. There are, of course, notable exceptions. IBM and Apple are two very notable exceptions to the rule.
Despite the reality that history teaches about the high-tech industry, shareholders/investors and the popular press will dive in and report what is being said by the newsmakers. Little is ever done, however, to figure out what all this actually means. Perhaps this is because the very nature of preparing a patent strategy is something that requires both understanding of the patent laws and a healthy understanding of business realities and evolving technologies, and not just business realities or technological advances in the abstract. Rather, in order to truthfully plot a course calculated to succeed company leaders need to be cognizant of the actual business realities facing the company, not the talking points of lobbyists or those who write SEC filings. Furthermore, a comprehensive understanding of the companies own research and development, as well as where the industry is heading, is crucial when attempting to create the patent strategy.
Why Have a Patent Strategy?
The first place to start is with the “why.” We can largely dispatch with this quickly, but in my experience adults are the same as children. If they don’t understand “why” they are not likely to engage in wise or appropriate behavior.
“Why can’t I touch the stove daddy?” The parent responds: “Because it is too hot.” Is that satisfying? Typically no. Eventually the child, driven by curiosity perhaps, will touch the stove and get burned. That will teach the child, who now internalizes. Of course the child still likely won’t trust mom or dad on other issues where curiosity will require fact based experience to internalize the lesson.
The thing that separates adults from children, in at least some instances, is the ability to learn without having to engage in painful experienced based internalization. Said better — the thing that separates successful individuals from those who fail is overwhelmingly that they have the ability to educate themselves enough to understand various issues well enough that they can discern competent advice from highly trained experts. The best leaders surround themselves with competent individuals and rely on them, but without abdicating.
So the “why” for developing a patent strategy is simple. Although the Board of Directors and top level executives are typically not scientists, engineers or patent specialists, successful business leaders understand that today more than half of a companies value, sometimes significantly more than half, is represented by the intellectual property portfolio. Furthermore, a recent study showed that intellectual property is responsible for $5 trillion in economic value in the United States each year, which represents nearly 30% of GDP. See IP Contributes $5 Trillion and 40 Million Jobs to US Economy. Companies like Coca-Cola have their value dominated by trademarks, but in the high-tech world we live in today the king of the intellectual property portfolio is the patent — hands down!
Not as Easy as You Might Think
To some finding an appropriate patent strategy is as simple as searching for the winning scores of last night’s baseball game. Find an appropriate plan and execute. After all, obtaining a patent is relatively easy. Just hire a patent attorney, provide information regarding the technology in question and pay the fees due to the attorney and to the United States Patent Office. Such a linear approach to protecting technology is certainly one option, but an option that will lead to haphazard creation and identification of intellectual property assets. It also fails to take into consideration the numerous issues that require thoughtful consideration prior to implementation of a plan that is calculated to actually succeed.
Prior to even considering a patent strategy it is first important for a company to take an introspective look at its own business, including goals for the future, client needs, core competence and existing research and development. Once the internal review is completed it is necessary to engage in market analysis, focusing on competitors, business opportunities, alliances and industry realities. Only after a thorough internal and external review do you have any chance of pursuing a winning strategy.
First, allow me to acknowledge that there will be some who will disagree with my previous statement, likely saying: “We succeeded and never engaged in any kind of review or audit as you suggest.” That is, of course, possible. Like a blind squirrel finding a nut every once in a while, or the United States Supreme Court getting a patent case correct, the unexpected and near impossible can and does happen from time to time. Developing a winning strategy, however, will not rely upon luck, good fortune, leprechauns with rainbows, horse shoes or rabbits feet. Frankly, the foot wasn’t so lucky for the rabbit, and superstition is fine if you are an athlete who needs confidence to engage a repetitive task expertly, but for businesses those that prevail most often will do so because they have implemented systems and processes that are likely to lead to a desired result.
Charting a Path for Success
So how exactly do you develop a winning patent strategy? Here are some things you need to know to maximize your chance of success.
1. Engineering for the Human Element
Engineers inherently know what many other scientists and business people seem to forget, or discount. Mr. Murphy of Murphy’s Law fame was absolutely accurate. Whatever can go wrong will go wrong. But why? It is because of the human element. Allow me to explain.
The major difference between many computer programmers and most computer/system engineers is that a computer programmer will frequently code software so that it works. The computer/systems engineer, however, knows that the software needs to be coded so that any “idiot” can operate it. Most people who use software will not be experts or even knowledgeable about the intricacies of what goes on under the hood. Software needs to be capable of any number of user mistakes without frying the computer or melting down the system.
Any patent strategy needs to be capable of withstanding user error. There will be times when management on various levels fail to green-light a project to the next level when that project could have been an enormous success. There will also be situations where projects will be green-lighted to the next level when they should have been weeded out and not pursued. Establishing clear criteria, as well as creating checks and balances, are essential. You need to make sure that the human element doesn’t crash opportunity or suck up valuable resources. You also need to make sure that creativity and ingenuity is rewarded and not stifled.
2. Training and IP Audits
It is always amazing to me how so many independent inventors can convince themselves that extremely ordinary things are patentable and will make them rich. It is even more baffling to me that many professional inventors at corporations and universities think that what they have developed isn’t really innovative or worth pursuing. It seems that in the corporate innovation world many professional inventors think that if they came up with it then it couldn’t really be a patentable innovation. They are their own “obviousness filter” and in many cases their own filter is much more strict than even the Supreme Court’s restrictive views on the matter.
It is essential to create routine training for first line scientists and engineers so that they can understand the patentability requirements. If these professional inventors are allowed to have a skewed view of what is patent eligible and what is considered non-obvious then they are going to overlook many opportunities to patent what the company is investing in. Similarly, first line and upstream management needs training, but of a different sort. These folks are the choke point and will weed out things that can and should be pursued while approving things that should be halted. You cannot expect perfection, but understanding the business of innovation and financial aspects of patents should improve decision-making.
Bringing in a patent attorney or law firm to conduct an audit to see what your people are missing that could be patented is definitely a good idea, and one that always uncovers assets previously unknown.
3. Learning from Success
One of the things that drives me nuts is the anti-patent mantra that suggests that patents are not really necessary. I could call such a position many things, but for now let’s just call it recklessly naive.
Those who do not know history are doomed to repeat it, and those who refuse to imitate successful companies are doomed to an uphill struggle. Of course, as already pointed out, success can be lucky. So when seeking to learn lessons and imitate you should consider looking at those companies that have been market dominant for a very long time.
I’ve had the opportunity to interview Manny Schecter, who is the Chief Patent Counsel for IBM, on several occasions. Whenever we talk, even when just touching base and not on the record, I always ask whether it is a struggle to continue to have senior management at IBM buy into eye-popping research and development budgets. When I last spoke to Schecter on the record he replied, as he always does, “it is not a struggle… everyone at IBM is on board with being the industry leader.” IBM spends nearly $6 billion annually on research and development and has spent a generation as the top patenting company in the world. See IBM’s Formula for Success: Patents, Patents and more Patents.
So why doesn’t the industry learn from the IBM example and seek to duplicate it? I put that question to Schecter who, without missing a beat said: “I don’t worry about what others are doing.” Like a runner at the front of the race who knows they have the stamina and speed to win, IBM doesn’t look back, they just keep on keeping on, confident that they will succeed. Explaining this confidence Schecter went on to say: “I suspect our business exectuves are more in tune with our IP strategy than with some of our competitors. We also outspend our competitors in terms of research & development.” Indeed, there is no substitute for top level leaders understanding IP strategy, and it is certainly true that the more you look the more you find. That is why I have never understood why in troubled times companies cut research and development, as if that will lead to greater innovation.
Another great place to look for long-term success is Apple. It is hard to characterize Apple as anything other than wildly successful, as indicated by their market dominance and copy-cat products that seek offer substitutes for the iPod and iPhone. Indeed, Apple is also a perfect example of how the patent system is intended to work. Patents are strong, but waste over time because technology grows stagnant. To continue to reap the benefits of a patent portfolio you must continue to innovate and continue to protect that innovation. Patent are fragile because if you obtain a patent I could obtain a patent on an improvement, thereby blocking you, the original patent owner, from making, using and selling the improved version of your own invention. That is why when Apple finds a hit in the marketplace they patent the innovation from every angle and from broad to ultra-specific. They patent successful products over and over and over again, preventing blocking to the greatest extent, thereby insulating themselves. See The Apple Way: Repeat Innovation + Patent = Domination.
The morale of the story is this: Anything worthwhile is not easy, and pretending that something as complicated as a winning patent strategy will just fall into place is merely a fairy tale. Providing your creative employees and business managers with training to identify patentable assets will pay dividends, as will periodically having a patent attorney or firm conduct an audit to identify what might otherwise fall through the cracks. Of course, none of this matters without a commitment to excellence, which requires appropriate R&D spending and a progressive and non-apologetic patent procurement strategy.- - - - - - - - - -
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Posted in: Business, Companies We Follow, Gene Quinn, IBM, IP News, IPWatchdog.com Articles, Patent Business & Deals, Patents
About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.