Faced with ever-shrinking budgets and mounting pressure from the C-suite to demonstrate intellectual property (IP) value, many enterprises have jettisoned a once-prevailing global patent strategy: “File anywhere in the world where we or our competitors manufacture or sell products.” Though relatively less expensive, a more selective approach may still incur substantial patent filing, prosecution, and maintenance costs, consuming resources that could be allocated to more impactful IP strategies.
In addition, electing to file more selectively than in the past does not necessarily equate to an optimal global patent strategy. Indeed, patent filing and maintenance decisions may remain superficial, driven more by opinions and misconceptions than by rationality. In contrast, a rational strategy considers factors such as claim scope, the competitive landscape, product revenue, and enforceability of patents in jurisdictions of interest. Enterprises that embed more rationality in their global patent strategy are likely to realize a higher return on their IP investment.
Subjectivity, Limited Knowledge, and Misconceptions Impact Patent Decisions
Engineering and product management leaders often participate in patent filing and maintenance decisions. They tend to approach the decision-making process based on the premise, “It is important to protect my company’s technology through the patent process and to prevent competitors from using that technology.”
Although sensible as a general proposition, too often that premise becomes the crux of a superficial, binary process:
“If I – the decision maker – am convinced that the technology is, or could be, valuable to my company, then we should file for patent protection. If not, then we shouldn’t file.”
Such a process is inherently subjective, casting the decision maker as the arbiter of what is valuable. It also insulates from deeper scrutiny conclusory statements such as, “Competitors should not be permitted to have access to this technology that my company is not interested in commercializing, but that I believe is valuable.” Further, a subjective process complicates attempts to reach consensus. When participants vigorously disagree, objective considerations carry little weight, and the final decision is commonly dictated by the person with the most political capital or clout within the enterprise.
Besides subjectivity, patent decisions may be impacted by leaders’ limited knowledge on relevant topics. While engineering and product management leaders may have impressive insights into technology and products, their knowledge of the company’s commercial transactions and the competitive landscape may be incomplete. Similarly, their knowledge of patents and IP protection systems around the world may be quite limited.
Leaders also may hold one or more of the following common misconceptions:
- Every patent is a powerful patent. Some leaders do not appreciate that patents can be broad or narrow in scope. Instead, they mistakenly believe that the legal scope of a patent is defined by whatever technology is described in the patent abstract, description, and drawings, rather than by the claims. Therefore, they assume that obtaining a patent necessarily forecloses competitors from practicing the described technology.
- All jurisdictions possess equally effective patent protection regimes. Stakeholders often view patent filing and maintenance decision making as a check-the-box administrative exercise. They think that by simply paying the associated costs, their company will obtain a broad, readily enforceable patent in each selected jurisdiction.
In the final analysis, subjectivity, limited knowledge, and misconceptions may hijack the patent decision-making process. The worst-case result is an overly-inclusive corporate global patent strategy in which failure to file for, and maintain, patent protection is categorically deemed to present significant risks and lost opportunities.
The following hypothetical will be referenced throughout the remainder of this article:
- Apex, Inc. (“Apex”), a multinational corporation in a competitive industry, offers Product APX, which generates annual global revenue of $50M. As indicated in Table 1 below, Product APX is manufactured in Country A, Country B, and Country C, and is sold in Country A, Country D, Country E, and Country F.
- Apex’s chief competitor, Nemesis Corp. (“Nemesis”), offers Product NEM, a competing product to Product APX. Product NEM is manufactured and/or sold in some of the aforementioned countries and in other countries.
- Apex’s patent review committee needs to decide in which countries it should pursue or maintain patent protection.
If driven primarily by subjectivity, Apex’s patent filing decisions risk being misguided. Specifically, if Apex’s committee members believe that Product APX constitutes valuable technology, they are likely to push for patent filings in all or most countries where either Apex or Nemesis manufactures or sells products, regardless of whether patent protection is actually needed. The rightmost column of Table 1 illustrates the resulting filing decisions.
The Seven Hallmarks
In view of the substantial costs of global patent protection, enterprises should pursue protection only when, and where, a value proposition can be rationally articulated. Thus, seven hallmarks of a rational global patent strategy are as follows:
- Decisions are informed by innovation roadmaps and the market at large.
Decision makers should have a holistic picture of the enterprise’s short- and long-term commercial strategy, the relative footprint of competitors, and the possible future of the industry. Critically, such perspectives enable leaders to assess the value of technology in context, which fosters rational decision making.
For instance, Apex’s patent review committee should consider (a) how a planned improvement to Product APX fits into Apex’s broader strategy, (b) the reasonable likelihood of Nemesis or other third parties implementing the technology, and (c) the estimated damage to Apex’s business if patent protection is not secured. The countries in which the improvement is likely to be manufactured and sold, and those in which it might be replicated and sold by competitors, are also key considerations.
- The strategy distinguishes between patent claims and described technology.
Companies should be mindful of claim scope at the time of an initial filing decision, during patent prosecution, and after patent issuance. Otherwise, they may foolishly invest resources in patents that describe critical technologies, but whose claims provide trivial commercial value.
In assessing whether to maintain a family of granted Apex patents filed to protect a prior version of Product APX, Apex’s decision makers should consider the scope of the claims. If the claims no longer provide sufficient commercial value in light of technological advances in Product APX, Apex should consider dropping the patent family to avoid incurring future maintenance and annuity costs.
- The strategy is cognizant of relative strengths and weaknesses in patent systems around the world.
Patent protection systems vary, sometimes markedly, with respect to subject matter eligibility, quality of examination, strength and enforceability of issued patents, the level of certainty and fairness accorded patent holders and third parties, and other material aspects. And because systems evolve, assumptions based on past experience may no longer be valid. In recent years, the pendulum of the United States patent system has swung toward a more uncertain, less pro-patent status quo. Conversely, the patent systems of countries like China have become notably stronger. A rational global patent strategy monitors current conditions and emerging trends on a country-by-country basis and changes course when appropriate. The U.S. Chamber of Commerce International IP Index and similar resources can help companies decide whether to include a given country in a protection strategy.
As noted above, Product APX is sold in Country D. Nonetheless, Apex may opt not to file or maintain patents in Country D if it lacks a robust patent protection system and there are no optimistic prospects of the system improving.
- Revenue data is used to guide the strategy.
Decision makers may know the primary countries in which company products are manufactured or sold. However, they only may have general impressions of the relative significance of those countries. Also, they may be unaware of relevant activity in other countries. Accordingly, country-specific product revenue data should be sought from sales or finance teams. Such data helps confirm which markets truly are important and thus worthy candidates for patent protection.
As part of a deliberative decision process, Apex leaders should drill down to understand what portion of the $50M global annual revenue for Product APX is attributable to specific countries where patent protection is in place or could be pursued. If Country E accounts for less than $1M in revenue annually and the untapped market potential is small, Apex may determine that patent protection is unnecessary.
- The strategy supports monetization efforts.
A rational global patent strategy seeks coverage consistent with a company’s broader monetization strategy. For example, patents may be sought in both primary and secondary fields of use, and in countries not core to the business but where future licensing is contemplated.
Apex may decide to file and maintain patents in countries of secondary commercial importance in the near term if it anticipates future opportunities for licensing, enforcement, transfer, or the like. For instance, Apex’s product roadmap may include plans to launch Product APX version 2 in developed countries next year and to license that technology to third parties in emerging markets eight years later. Apex thus may consider filing patent applications in such emerging markets pursuant to its long-term plans.
- The strategy is continuously confirmed.
A filing decision rarely should be viewed as an irrevocable commitment to shepherd a patent application to issuance and then maintain the resulting patent for its maximum possible term. Whether patent protection continues to be beneficial should be revisited periodically, such as through dialogue between IP counsel and stakeholders during patent prosecution, as a part of portfolio pruning rhythms, and on an ad hoc basis. Possible reasons for dropping a patent asset include (a) recognition that the anticipated or granted claim scope does not provide sufficient value, (b) a change in the innovation roadmap or product obsolescence that renders patent protection unnecessary, (c) a weak or weakening patent system in the corresponding jurisdiction, and (d) pivoting of the corporate monetization strategy. A reflective approach ensures that, as circumstances change, the enterprise adapts its global patent strategy to redirect resources to more productive uses.
Applying a reflective approach, Apex may elect to prune patents for Product APX that are held in certain countries noted in Table 1, based on reasons noted above (or other compelling reasons).
- A creative mix of tactics is employed to reinforce rationality.
To promote objective decision making, some IP teams implement a scoring model for invention disclosures and patent assets. Decision makers assign scores to relevant criteria, such as level of innovation, monetization opportunity, and detectability of infringement. The scores are then weighted to compute an overall score whose numeric value informs the decision whether to seek or maintain patent protection. Similarly, patent analytics software can be utilized to assess the corporate patent portfolio on an asset-by-asset basis, by technology or product focus, and within the context of a broader IP landscape.
Another approach is to establish a corporate IP policy that restricts patent filings to a maximum number of countries per invention, absent sufficient justification on a case-by-case basis. Such an approach encourages decision makers to thoughtfully identify countries having the greatest strategic importance and acts as a check on overly-aggressive filing plans.
To facilitate focused, efficient pruning of IP assets, each patent record in an enterprise’s asset management database should include metadata specifying associated products, license agreements, and/or other commercial details. Further, patent pruning reviews should periodically consider whether claim scope of a patent remains adequate.
From a filing perspective, patent searches, Patent Cooperation Treaty (PCT) applications, the Patent Prosecution Highway (PPH), and negotiated fee arrangements with law firms and translation service providers can be leveraged to reduce the costs of global patent filings, while also increasing patent quality.
By applying a mix of such tactics, Apex is more likely to file in the right countries for the right inventions, and to obtain patents of suitable scope in a cost-efficient manner.
An optimal global patent strategy seldom is achieved when driven by leaders’ subjective assessments of the value of individual technologies. To achieve a rational strategy, decisions should be informed by (a) a holistic view of the technology landscape, (b) an appreciation of patent scope, (c) an appreciation of material differences in patent regimes around the world, and (d) product revenue data by country. By implementing the seven hallmarks detailed above, enterprises will no doubt begin to realize a higher return on their IP investment, while minimizing costs and other resources needed to support their global patent strategy.
This article reflects my current personal views and should not be necessarily attributed to my current or former employers, or their respective clients or customers.