“When a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully." – Samuel Johnson
The meltdown in the financial markets, the drying up of credit and the scarcity of investment capital makes it paramount that companies, particularly in the technology sector, “concentrate their minds” on immediately deploying their most valuable assets – their intellectual property.
A technology company’s patent and trade secret portfolio is the image that the company has of itself. These technological assets are what make their products prized in the marketplace. They are the product of millions of dollars and years of work spent on research and development. They are the most valuable assets the company has – and they are right at hand.
A technology company executive must ask him or herself -- How much is my patent portfolio worth? Have the R&D expenses and the lawyers’ fees been worth the investment? Can I get some competitive advantage – or, even better, some cold, hard cash, for my patents -- or are they just going to decorate the walls of the company headquarters?
Any rational businessperson will ask these questions -- and one more: How can I make the most money possible from my patent portfolio, whether through licensing or, if necessary, a lawsuit? Here are some suggestions of ways a company can maximize the value of its intellectual property portfolio and the return on that investment:
- Concentrate on features your competitors need Contrary to what many think, a patent does not give the inventor “ownership” of an idea – just the right to exclude others from using the invention. The value of a patent, then, is what someone will pay to not be prevented from using the patent. The damages a patent infringer will be required to pay is directly related to how much that infringer needs that patent to stay in business. Thus, if you choose to wield your critical patent against your competitors, make sure that they know that you could easily shut them down and make them pay well for any license. The latest court decisions make it clear that the risk an infringer runs from using your patent is directly related to the value that patent has to that infringer.
- Focus on features that are virtually impossible to design around A corollary to the first rule is to make it difficult, if not impossible, for an infringer to “design around” your patent. If a competitor can easily and cheaply gain the same competitive advantage by tweaking your invention in a way that does not infringe, your patent is virtually worthless. Make sure your engineers and patent attorneys anticipate these loopholes.
- Make your patent part of a standard Making sure your patent is part of an industry standard is, obviously, easier said than done. However, the effect of the inclusion of your patent in such a standard can be a goldmine, as anyone who wants to practice the standard has to license your patent or else be barred from the market altogether. If possible, establish your own standard (Blu-ray, for example). Be careful, however, about properly disclosing your patents or “pooling” your patents with others who may be part of the standard -- the FTC has been known to cast a very dim eye on such practices.
- Make a possible injunction devastating Many economists have decried the effect of “patent holdup” – where a patent is given a value far in excess of its intrinsic worth because of the threat of an injunction. If you can bar your competitors from selling their products because of your patent on one specific feature that cannot be removed or avoided, the amount you can demand for a license (or as damages in a lawsuit) can skyrocket.
- Act like a troll Although so-called “patent trolls” have gotten a lot of bad publicity, especially in the technology sector, you may notice that many of them are quite successful in exacting quite substantial monetary returns from their patents. They pursue a profit-maximizing strategy which includes identification of vulnerable, profitable targets, relentless pursuit of those targets for possible licensing and a willingness to sue whenever necessary to exert maximum pressure. Indeed, if you actually use your patent in your product, you are in an even more powerful position than a troll. Although the courts have recently made it harder for companies who do not practice the patents they assert to get an injunction, an infringer’s competitor, on the other hand, has very little trouble obtaining this devastating relief from the court.
For the next few years, your company may be in survival mode. It may need to use whatever tools it has at its disposal to bring in cash and disrupt the activities of its rivals. Your IP portfolio – assets you have already paid for – may be the best and most effective weapon you have to weather the storm.