We are often asked about the value of patent protection.
Since a patent is a business tool its value to a business depends on how well it supports a business' strategy. If the business' strategy is well understood, and the role of patents in that business, then you are already well on the way to making well informed decisions that avoid wasting resources on needless patent protection.
So what are the factors that we consider when advising about patents? They generally fall into three broad categories:
- The motivation to file for patent protection.
- Is patent protection the best option?
- The strength of the patent.
These three factors assist to inform us about how well the patent would support the business's strategy, which in turn helps the business to decide how much resource to apply.
1. Why file for patent protection – what good will it do me?
There are many different reasons to file for patent protection. Some of the more common motivations to pursue patent protection include filing to:
- support a monopoly position in the marketplace
- support a manufacturing agreement
- provide leverage to support a cross licensing deal
- improve the business' asset base to support sale of the business
- provide an annoyance to your competitors who then have to design around your patent at their cost
- provide support for contractual agreements that require some form of IP registration (eg, R&D agreement)
- provide validation to potential investors and joint-venture partners.
A common thread in each of the above reasons is to obtain a commercial advantage over your competitors.
Understanding the motivation behind filing for patent protection is important as it can affect how the patent application is written, what data is required to support the patent application, and in which countries patent protection is sought.
For example, if the primary motivation behind filing for patent protection is to support a monopoly position in the marketplace then the patent application should be prepared with competitor manufacturing and sales in mind. Alternately, if the primary motivation is to create IP assets to increase company valuation to support sale of the business then the approach to patent filing may be to focus on volume of filings, over relevance.
2. Is patent protection the best option? What about trade secrets?
There can of course be many reasons to obtain patent protection, but there may also be other more suitable routes to pursue, such as keeping the innovation as a trade secret or relying on market spring-boarding (getting in first).
There are advantages and disadvantages with both patents and trade secrets. The obvious disadvantage with patents is that you have to publicise your innovation, and the patent process (including litigation) is very expensive. The benefit of patents is that they provide a commercial advantage over your competitors since you can maintain a monopoly position, or license or sell your IP rights.
The disadvantage with trade secrets is that once your trade secret is lost, it is gone forever. However, if the trade secret can be maintained, then you potentially have a valuable asset that can be maintained at no cost (think Coca Cola recipe and KFC 12 spices).
When weighing up whether to maintain an innovation as a trade secret, or pursue patent protection we ask our clients to think about the following factors:
- What is the value of the innovation in terms of commercial opportunity?
- How patentable is the innovation? Is it an incremental improvement or a whole new innovation paradigm?
- Do they have adequate protection already that may cover the new innovation, or aspects of the new innovation?
- What is the technological life of the innovation?
- Can the innovation be easily reverse engineered?
- If you do file for patent protection, can you detect patent infringement?
- What is the route to market for the innovation?
- What is the risk that a competitor will develop the same technology?
There is not one factor that dictates whether to file for patent protection or maintain the innovation as a trade secret. However, once the above analysis is performed then one option generally stands out.
3. How strong will the patent be?
There are two aspects to this question. What is the chance that I can get a patent granted? And what is the commercial opportunity represented by the patent?
A strong patent is one that is both (1) highly patentable (ie, it is clearly a new innovation), and (2) covers an area of commercial significance.
A weak patent is one that is (1) of questionable validity (eg, it may be obvious) and (2) does not cover an area of commercial significance. Any patent that does not cover an area of commercial significance is a weak patent. What's the point of obtaining protection around a particular technology if no one is interested in it?
Many patents fall somewhere in between. For example, a patent that is of questionable validity but covers an area of commercial significance. Such patents are still justified. This is because if the patent is granted then you have a valuable asset. That asset is going to be an annoyance for your competitors since to have certainty in their operations, they will either have to attack the validity of your patent (very costly), obtain a license, or attempt to develop a design around (can also be costly, and no certainty of success).
Searching for earlier publications gives some understanding about the chance that a patent will get granted. I say 'some' because a typical searching budget does not allow every relevant publication to be located.
Patentability searching is widespread and is offered by many organisations. However, the value of these reports is directly relevant to what you put in. In this case, how well you convey the innovation to the searcher, the effectiveness of their searching, and how the results are conveyed to you.
Generic searching organisations typically do not provide effective recommendations since they do not have the opportunity to completely understand the innovation, which requires detailed discussion with the inventor.
What is typically delivered is a 'data dump', which we are often given to interpret for the client.
Ultimately, an assessment of patentability requires the steps of (1) understanding the closest disclosures of the innovation, (2) making an assessment of the differences that exist, and (3) understanding the significance of those differences, which can only be done in collaboration with someone that understands the technical area well.
Only then can an effective assessment of patentability be performed.
4. Is there a guiding principle?
The better you understand how IP fits into your business the easier it is to make decisions about IP. Whether that be what to protect, where to protect it or how much to spend.
The output should be an asset that works for, and supports, your business within a budget that is appropriate for your business.
This blog is written by Andrew Baker, AJ Park, Senior Associate, Patents, Auckland