Managing Patents Starts with People

So, you have decided that patents should be part of your business strategy. You have a couple of ideas or even a few patent applications filed with the Patent Office. The patent attorney you met at a networking event seems to be doing what he is supposed to. Your patent applications are as incomprehensible as all of the others you have seen and his bills have only been slightly higher than what you expected. The part that is driving you crazy is the amount of your time it has taken. You have other responsibilities and you are suspicious that letting your patent attorney manage himself is not a wise idea. Large companies have in-house counsel or entire IP Management groups. You don’t. How are you going to manage this stuff without driving yourself insane?

Good patent management starts with people. Don’t try to do it all yourself.  There are many responsibilities to be handled and few of them justify the time of a senior executive (even or perhaps especially in a small company).  You also shouldn’t expect to outsource it all to your patent attorney.  It is a capability that your business needs to build if you are serious about patents as a business asset.

Patent management roles are not really different than any other area in your business. In small companies, the roles may be handled by one or two people. In bigger companies, there may be a larger team, most of whom have responsibilities outside of the patent management stuff. It takes a very large or very patent-focused company to have a dedicated patent management team.

As you consider the roles at your company, make sure you give some thought to how much time people will be able to dedicate to patent activities. Because their patent role probably won’t be their only role in the business, you should also give some thought to the priority patents should get. I don’t know that I have ever worked with a small company that wasn’t under staffed.

Patents can be very time sensitive. There needs to be adequate coverage even when other critical events like product launches, trade shows, or a major transaction get top priority.

Patents are a process. The initial filing (particularly if it is a provisional filing) is only the beginning. One of the biggest mistakes companies new to patenting make is thinking that patents will manage themselves once you clear the hurdle of initial filing.

In the next post, we will look at the individual patent responsibilities in detail.

Twitter Stole My Idea (but in a good way)

Back in March, I started wondering about whether inventor assignments could be used to promote a culture of innovation within a company that both recognized the value of patents but assured employee inventors that the resulting patents would not later be abused by profiteers.  You can check out the original post, Patent Poison Pill.  I finished the post with asking readers to let me know if they heard about anyone doing this.

Well, last week, Twitter announced they were doing just that with their Innovator’s Patent Agreement.  While I have no illusions that they were inspired by my humble post, it is nice to know that I wasn’t talking crazy.  They specifically focused on software patents, because it is an area rife with abuse and software developers tend to have particularly strong feelings about software patents.  Many folks charge that patents are incompatible with the “hacker ethic” that is part of software developer culture (including programmers who use their skills for the powers of good, not just villainous virus-writing, credit card stealing “hackers”).

But I continue to think that it could have broader application than that.  I know many employee inventors who would have similarly strong feelings that their ideas should be used only to create and defend, regardless of whether they work in electronics, materials, or mechanical devices.  In those cases, I might get rid of the notion that asserting patents is inherently bad, but focus instead on the idea that the inventor should have some say in whether that is the right course for their invention.  Freedom to defend would still be an integral part of the company grant, but you could also add a more sophisticated mechanism for using patents offensively if everyone agreed it was the right thing to do.  Perhaps define a share of any damages (less expenses) that goes to the inventor to avoid haggling with holdouts.  It could be modeled on the share of licensing that many academic inventors receive from universities.

My congratulations to Twitter for being willing to innovate and experiment with their patent rights.  I admit that when I wrote my original post, I doubted that any substantial company would be willing to take the risk.  It clearly reduces the “book value” of their patent assets by placing an encumbrance on them.  The question is whether it pays off in employee recruiting, retention, and engagement with their patent efforts.  Twitter is putting their patent rights where there company culture is.  I hope it works well for them.

How Much is That Patent Lawsuit Going to Cost You? (CNET)

The cost of patent lawsuits is incredible.  The fact that you can’t actually figure out whether a patent is valid and infringed without spending hundreds of thousands or millions of dollars is mind-boggling.  Jim Kerstetter at CNET provided this handy table to summarize the state of patent lawsuit costs:

Patent Lawsuit Cost Table

You can read the entire article here.

For small technology companies with patent activities, “Less than $1 million at risk” could seem like a pretty big range of cases.  You might hope that costs continue to drop as the case size gets smaller.  Sadly, that isn’t really the case.  The best that you can say is that once you drop below half a million, the lawsuit probably doesn’t make sense for anyone and both parties should be fairly motivated to settle.

Given that these costs are paid by each side and do not include any actual damages awards or settlement payments, the economics of small patent lawsuits really don’t make sense.  At less than $5M at risk, the only people making out from the lawsuit are the attorneys.  The calculation gets even worse when you consider that winning and losing appears to be a basically 50/50 proposition (defendants are as likely to win at trial as plaintiffs).  And, the median patent damages award in 2010 was only $1.8M.  So, for a $1.8M case to go to trial according to the above chart, the plaintiff had to spend $2.5M in attorneys fees and other costs.  So, the winner is down $700K.  That doesn’t make business sense for anyone.  Now, 2010 was apparently a bad year for patent judgments, but even in more normal years the apparently better numbers are skewed by a few extremely large cases.

So, what is a technology company to do?  First, build an awareness of your risk and develop strategies to at least deal with competitors and supply chain risks.  Second, monitor patents of interest to make sure they don’t fall into the hands of patent trolls.  Realize that most non-practicing entities are not interested in small market patents, so you should make an effort to secure them before your market becomes big enough to be appealing.  Start buying patents from other companies, universities, and inventors early.  If you can’t afford this yourself, consider the development of a patent pool through an existing or new industry organization.  As you grow, you need a patent risk mitigation strategy.  The earlier you start, the more effective it will be.

Free Prize Inside (Book Review)

I recently read Seth Godin’s Free Prize Inside.  The publisher had actually sent me a review copy back in 2004 when I was reviewing books for American Lawyer Media’s Patent Strategy & Management.  At the time, I didn’t really give much thought to reading it because I thought of Seth Godin as a marketing guy and I wasn’t all that interested in marketing books.  As it turns out, the publisher knew what they were doing when they sent it to me.  It is really an innovation book that happens to be by a marketing guru.  So, I am a bit late getting to it.  My apologies to Seth Godin.

While it is very much an innovation book, the author states in several different places that it is not about patents or that kind of innovation.  He positions the book as being about “Soft innovations” that anyone can do in any market.  And, he specifically tries to distance such work from difficult technical innovation that you might file patents on.  I found this interesting for two reasons. First, even as he was writing it, people were pushing more and more software and business method patents that were pretty “Soft” through the Patent Office and more and more companies were looking for patentable inventions throughout their organizations, not just from R&D teams.  Second, the real focus of the book was about championing innovations and getting them taken seriously within an organization, which applies equally regardless of whether there is a patent involved or not.  I suspect that the “no patents required” positioning had more to do with being approachable to non-technical innovators (who are a much larger market of readers) than anything to do with patents.  This is all a very long way of saying that the book has very useful lessons for patent owners and managers and is worth reading if you are interested in how new projects and innovations can happen in your company.

The bid idea in the book is that historical big bet innovation strategies are not cost-effective.  Both big advertising and big R&D are too risky when you figure in how much more money you need to make to really profit from them.  Big approaches drive up your expenses, so making money with them is difficult.  Small innovations that provide unique customer value are really where it’s at.  He then provides interesting frameworks for both championing your innovation and for finding really good ones.  Both of these frameworks are well worth the read.

The book is short.  Seth Godin is an entertaining writer.  I am still mulling over how to use some of the ideas from his frameworks to help organizations gather and assess new ideas for features, products, and patents.  If you share my interest in encouraging innovation in your company, I hope you will read the book and share your thoughts on what it means for patent management.

Incidentally, the author defines a “Free Prize” as an innovation that creates revenue far greater than its cost of implementation.  Under that definition, what business executive doesn’t want to create more free prizes for their company?

Helping Patent Examiners Get It Right

In my last post, I talked about a new program by the USPTO and AUTM to improve the technical training of patent examiners.  I commented that I thought that the program really doesn’t address the central issue of examination quality, which is the amount of time examiners can spend on each application and the level of expert know-how they have access to.  In our present system, patent examiners are not going to arrive at the right outcome when it comes to evaluating the novelty and proper scope of inventions in an adversarial relationship with patent applicants.  It is up to patent applicants to take seriously their role in educating the examiner and guiding him or her to the correct claim scope for the invention (which isn’t necessarily the maximum claim scope a patent attorney could get).

Focusing on correct claim scope over maximum possible claim scope is far more challenging than it sounds.  First, patent attorneys are trained to be zealous advocates for our clients.  We are taught to pursue maximum claim scope, since that will garner the greatest apparent value for the resulting patent.  Not only does this impact attorneys’ natural tendency to advocate for broad claims, but it actually raises questions about their competence to pursue anything less (which opens the door to malpractice claims).  In most cases, this tactic is going to have to come from the client and it will require effort to get attorney cooperation.

Second, correct claim scope is difficult.  People spend literally millions of dollars in patent litigation to uncover the correct claim scope of patents.  To seriously commit to correct claim scope is a more expensive approach for each individual patent (but readers will know my perspective that you want fewer, better patents clustered around your core technical and market features).  You, your inventors, and your patent attorney need to really know the state of the art.  It means:

  • being diligent in patent searching for every patent application
  • searching technical and product literature beyond patents
  • building a technical reference library in your field and asking your technical staff to keep adding to it
  • organizing your knowledge of the state of the art, your products, and your competition so that you can cost-effectively use it in your patent applications (as well as for competitive intelligence, marketing, and research & development)
  • making sure that the best information is provided to your patent attorney for each patent application

Finally, you have to understand that patent examiner time and attention is a premium.  Too many claims, too long of a specification, and too many references are as bad as not enough.  Standard patent drafting techniques have been designed to make patents largely inscrutable, almost requiring litigation to figure out what they actually mean.  It is no wonder that examiners have stopped reading the things.  Some amount of multi-level description with uniquely defined patent terminology may be necessary to support good claims.  But if that is the case, you need to make sure that there is a “human readable” part of the application that guides the examiner to the point of your invention.  Done properly, this can also market the invention, your technology, and even your product to get the examiner’s attention and (hopefully) cooperation.  This also makes your patent a much more valuable marketing and licensing tool if your goal is to convince others to use your technology and pay you for it without litigation.

Patent examiners really want to make the right call.  They want to help applicants issue strong, novel patents with a reasonable set of claims.  Even if you run into an examiner that is less diligent or doesn’t really understand your technology, supervisors and the Board of Patent Appeals and Interferences want to get it right.  You can help them get it right, but it may mean breaking with standard patent practice and a desire for lots of cheap patents.

In the end, doing the right thing to guide the patent examiner will make your patent portfolio stronger and improve the patent system.