Ever since the term “patent troll” was introduced into the intellectual property lexicon in the late 1990s, followed closely by calls for “patent reform,” the value of a U.S. patent has been systematically reduced whether by legislation, court rulings, or regulations. The changes have increased uncertainty and have increased pressure on patent applicants by demanding more precision during the drafting process to meet the requirements imposed by the ever-changing case law. At the same time, patent prosecution has become subject to intense bidding among law firms and, to a certain extent, commoditization as companies impose fixed fees to control costs.
These changes and the inherent tension between requiring more precision but at a lower cost put a premium on the need for companies to have a comprehensive IP strategy.
Even a cursory review of recent U.S. Supreme Court case law demonstrates the trend of increased pressure on patent applicants and reduced patent value.
- The Festo case severely limited a patentee’s ability to use the doctrine of equivalents to demonstrate infringement, thereby increasing the pressure on applicants to avoid the use of claim amendments that could give away important DOE claim scope.
- The eBay case eliminated the practice of a patentee automatically obtaining an injunction after a finding of infringement, which reduced a patentee’s leverage in negotiating a license or settlement.
- The KSR decision relaxed the standard to find a patent invalid as obvious.
- The Alice decision reduced the number of inventions considered patentable subject matter, which instantaneously called into question the validity of thousands of already issued patents.
- The Limelight decision made it more difficult to show that a patent was infringed in situations where multiple companies were involved in the infringement.
- The Nautilus case changed the standard for invalidating a patent for indefiniteness.
- And, the TC Heartland decision reduced the patentee’s venue choices.
It wasn’t just the judicial branch placing the bullseye on patents. Congress created a brand new forum where potential infringers can challenge the validity of issued patents. In 2012, Congress passed the America Invents Act (AIA) – one of the most significant changes to U.S. patent system – which introduced the Inter Parties Review (IPR) procedure. The IPR procedure allows an administrative challenge to patent validity in the USPTO and further shifted leverage from the patentee to a party challenging validity.
Indeed, the IPR process has been described by commentators as a “patent death squad.” Finally, if any nails were still sticking out of the proverbial coffin, the Supreme Court took care of it in the recent SAS case, which held that IPR challenges cannot be narrowly instituted on just a few patent claims, but the USPTO must decide the validity of all the patent claims challenged by a potential infringer.
Notwithstanding all these changes, companies continue to invest in U.S. patent protection, and for good reason. The current patent landscape represents the pendulum swinging decidedly in one direction. But it will swing back. The effects on innovation caused by narrowing the scope of patent rights will compel this correction. When it does, those companies that developed, and executed on, the right IP strategy will be even better positioned in the marketplace to succeed. The two most important things a company can do to ensure it is generating meaningful IP are to align its business and IP strategies and base its IP strategy on a solid understanding of its competitive landscape.
Every patent should support a business objective. While it sounds elementary, unless care is taken to ensure that business objectives and strategies are layered into patent strategy discussions, over time a company’s filing strategy can go left while the business goes right. This divergence results in patents that are, at best, non-core to the business with minimal strategic value or, at worst, a waste of money with no likelihood of monetizing.
The key to maintaining alignment is to establish a robust process for reviewing both new inventions and the existing patent portfolio to critically assess the alignment to business strategy. We have developed and implemented these processes for numerous companies, and in our experience, it should include input from multiple stakeholders including not only the technical and legal functions but depending on the circumstances, marketing, sales, and business unit leadership to make recommendations on IP investment.
The processes we have implemented focus on directing properly IP development budgets, for example, if a new invention does not fit a business strategy, don’t proceed to filing and if an existing IP right is not aligned with a core business or has no strategic value, consider abandoning or divesting it to save on prosecution and maintenance fees and/or potentially generate revenue via patent sale or license.
Another key to ensuring that companies realize a return on IP investment is to create a strategy built on a solid understanding of the competitive patent landscape. A good patent landscape serves multiple purposes. The most obvious is helping companies understand the prior art, but a good patent landscape is also a type of competitive intelligence exercise for the business to understand how the company’s portfolio compares to those of its competitors, suppliers and customers and identify competitive investment, risks and trends that can be fed back into the company’s business and IP strategy. The key to a good patent landscape is synthesis. It’s not enough to report data; rather, providing concrete answers to questions the company asks along with an actionable strategy are key to getting the benefit from a patent landscape project.
It is an interesting time in this country in terms of intellectual property protection. On the one hand, court decisions and legislative and regulatory changes continue to increase the pressure on patentees and patent attorneys in the application process. On the other hand, cost pressures have led to fixed fees and almost a commoditization of the process. To be successful in generating meaningful and valuable intellectual property, a comprehensive intellectual property strategy is key.
Developing this strategy requires a greater understanding of where a company’s IP is presently directed (on end products or raw materials, on manufacturing knowhow or end user applications, etc.) and where competitors have invested their IP dollars, understanding what market space is available or ripe for innovation, and evaluating how allocating or re-directing IP investments can best achieve their goals. The net sum of all of this is that companies who continue to invest in IP should also be investing in a comprehensive strategy to ensure that their IP portfolios and investments will provide the right strategic benefits and monetization opportunities.
About the guest authors:
Karl Maersch and Anthony Jacono are principals at West Four IP, a boutique intellectual property consulting firm that delivers IP strategy advice to business leaders, R&D teams, and legal teams, with service offerings that cover all facets of intellectual property strategy including analysis, generation, protection, valuation, monetization and licensing.