Know the difference between the facts and fiction of intellectual property
When product executives get together, we’re usually preoccupied with urgent tasks: pricing and positioning, new introductions, social networks, voice of customer, Agile development, etc. We tend to neglect non-urgent issues, even if they have long-term value potential. Intellectual property (IP) is only discussed now and then.
At one former employer, my chief technology officer even took it a step beyond neglect, saying he didn’t want his team reading competitors’ patents—and risking subconscious copying. Then he stated one of the seven common myths about intellectual property.
Myth 1: Even if you can get a patent, technology moves too quickly for it to be important. In fact, the fast-moving tech industry has as many patent assertion actions as all industries put together. Consider these headlines:
order preventing you from selling your product. Complying can mean a big waste of time and money reengineering the product. In a worst-case scenario, it could mean killing your product altogether.
In brief, a patent has a description of the invention, drawings and claims that set forth specifically what is covered. It can be a new device, a composition of matter or method. There are also special “design patents” that cover industrial designs and decorations, like those rounded corners on the iPhone.
A patent entitles the holder to sue infringers and nothing more. If the holder prevails, they can usually obtain an injunction preventing further infringement and monetary damages covering the value of the business the infringer won attributable to the technology. Note that companies are only entitled to damages covering prior infringement if the product is clearly marked as patented, along with the patent numbers. It’s the product team’s responsibility to ensure all physical products are marked and all software lists the patent numbers (usually in the manuals or in the “About” drop-down menu).
Let’s look at some of the other misconceptions about patents and intellectual property.
Myth 2: You can’t get a patent on software. While you can’t get a patent for an abstract idea like E=MC2 or a new algorithm to convert octal into decimal numbers, you can generally get a patent on a method deployed in a computer that does something useful. For example, a new type of graphical user interface, a method for evaluating computer code or parallel processing of data arrays.
Myth 3: Don’t bother to get a patent; it costs too much to enforce. While it can cost a bundle to defend a patent case—as much as $6 million to pursue a final verdict if a prestigious top-dollar law firm is chosen—patents are rarely litigated. A primary objective is deterrence or bargaining leverage, as seen in this heavy-handed email from Steve Jobs to the president of Palm, Ed Colligan. The email followed a phone call threatening to sue Palm for patent litigation.
The Palm CEO had already reinforced his position by purchasing an extensive patent portfolio from Siemens, and he got the result he wanted: Apple backed down after the bluster expressed in Jobs’ email. Fortunately, overt threats like this don’t happen often.
Defensive strategies are very common, but a strong portfolio also dissuades competitors from challenging you. The number of times a lawsuit didn’t happen is hard to tally, but I have worked with well-funded companies who, despite their knowledge of their competitors’ copying their technology, took no action for fear of retaliation.
In the unfortunate event you are sued by your competitor, a valuable portfolio might give you worthwhile counterclaims in settlement discussions. It’s risky to open a nonconfrontational licensing or cease-and-desist discussion with an infringer without opening yourself up to being sued in retaliation. Consult your attorney before taking any steps here.
As a side note, a strong patent portfolio can also increase the value of startups that hope to be acquired—particularly if the patents are strong enough that they can be defended by the acquirer when the market is bigger. Patents are important tools for protecting your company’s edge. Patents also are potentially valuable assets for business development, contributing to partnerships. You don’t have to be a huge company like IBM with a licensing program generating billion-dollar royalties. Many smaller companies and universities license technologies they are not able to bring to market themselves.
Myth 4: A patent gives you the right to practice a technology. A patent is really the right to prevent someone else from practicing an invention. It’s a negative right. Someone else could already have a broader patent that covers what you want to do, while the offering you conceived of is actually an improvement. Therefore, having a patent does not give you the right to practice what you invented.
For example, let’s say you invented a new method for analog-to-digital (A/D) signal processing. Suppose your method combines several elements: A, B and C. Step A could be using the analog signal to charge a capacitor, step B could be disconnecting the analog circuit from the capacitor and step C could be connecting the capacitor to a computer and performing some computations in software.
Anyone wanting to practice A, B and C in combination needs a license to your patent. However, if another company has a patent covering a method for A/D conversion with only steps B and C, you will need a license to this patent.
Myth 5: It takes too much time and money to file a patent. The high-end law firms are very expensive, but there is a large supply of qualified patent drafters. Some are alumni of big firms striking out on their own. Others are patent agents, who are engineers that passed the patent bar exam and are qualified to write and prosecute patents. Fees range depending on location and business environment, but they start at less than half the hourly rate of the big firms. Some attorneys will even quote a fixed fee for drafting a patent application.
Dinos Gonatas holds a PhD in physics from the University of Chicago and a bachelor’s degree from Princeton University, and he has participated in executive education at the Babson College of Business and the Wharton School. His consultancy, CPG Advisors, focuses on IP and new technology commercialization. His expertise is in intellectual property management and business development, with an industry focus in high technology, communications and instrumentation. He also is an inventor, holding eight patents in synthetic fuel processing and thermal catalysis. He can be reached at firstname.lastname@example.org.