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Transcript of The Basics of Intellectual Property and Patent Strategy for Maximizing Business Value: The Good,...
IP: The Good the Bad and the Ugly-How to Create Value So You End Up with a Fistful of
Dollars
Jackie Hutter, MS, [email protected]
Take Aways from Today’s Conversation
Overview of the Types of IP
• Not just patents but a “whole toolkit”
Demonstrate that patenting is a business issue not a legal or technical issue• New model for creating long term business value
Introduce concept of patenting innovation vs. invention• Key to durable competitive advantage
Copyright: The Lean Legal Team 2013
My Perspective
• Almost 20 years as IP professional
– Law firm
• Prosecution and counseling
• Litigation
– Corporation
• Legal and innovation counsel
• Last 6 years as “IP Strategist”
– Put business issues before legal issues
– “Validate your business, not just
mine”
– Truth telling, not risk mitigation
• Research scientist/inventor
– Insights from the trenches
Copyright: The Lean Legal Team 2013
IP Strategists?•New breed of business counselor who aligns client’s commercial strategy with IP protection ▫Beware lawyers who “do strategy”
•IP and business expertise•Driving principle: “IP is worthless if it does not support a viable business strategy”• Frequently in-house lawyer, but not always•Many not attorneys
Copyright: The Lean Legal Team 2013
The Good, The Bad and the Ugly of Creating Value from IP
Copyright: The Lean Legal Team 2013
THE GOOD: PATENT & IP BASICS
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Patent vs. Intellectual Property
Patent
Trademark
“Intangible assets”
Trade secret
Copyright Intellectual
Property
Copyright: The Lean Legal Team 2013
Patent Types
1. Utility Patent:patents on inventions which function in a new way or to provide a new result
2. Design Patent:patents on the aesthetic design or ornamentation of something that already exists; no change for functionality of the object, only gives it a novel appearance
3. Plant Patent:patents on types of plants that may be reproduced by grafts and cuttings
Copyright: The Lean Legal Team 2013
What Is a Utility Patent?
• Exclusive rights granted by a
government to anyone who
invents or discovers any new
and useful process, machine,
article of manufacture, or
composition of matter, or any
new and useful improvement
thereof
• Patent irrelevant to business
value, only demonstrates
meets legal requirements
Copyright: The Lean Legal Team 2013
US Utility Patent Data
PatentlyO.com Copyright: The Lean Legal Team 2013
Top Patent Filers 2012
Copyright: The Lean Legal Team 2013
Where Can You Obtain a Patent?
• USPTO• State Intellectual Property Office of
China• Japan Patent Office…
National Patent Office
• International patent application office
• headquartered in Geneva, Switzerland
• Still must apply nationally
WIPO
Copyright: The Lean Legal Team 2013
U.S. Utility Patent Applications
provisional applicationAllow filling
without any formal patent claims, oath or declaration or any information disclosure statementLess costlyNo real protection“Saves place in line”
non-provisional application
Contains at least a specification, all the drawing figures and at least one claim.Goes through examinationCan be filed multiple times
Copyright: The Lean Legal Team 2013
Utility Patent Application Process
Invention Identified and
Vetted for Filing Expense
Application Drafted and Filed
by Attorney$5,000-$50,000
Application Published18 months
Office Action12-36 months
Response by Attorney
Amendment of Claims
$3000-$10,000
Final Rejection
Allowance$1500
Maintenance Fees3.5, 7.0, 11.5
Years$900, $2300,
$3800
Copyright: The Lean Legal Team 2013
Patent Features Exclusivity • One patent per invention• Without patent holder
permission no one can make, market, use, import, etc the patented invention– Otherwise, regarded as
patent infringementTerritory• Patent limited to certain
country• No effect on other countryTime• Term of a patent is limited• 20 years from earliest filing
date in US
Copyright: The Lean Legal Team 2013
Patent Business BasicsWhat Patents Are (and Aren’t)
• Given by government for useful, new and unobvious inventions
• Recognition that invention meets the legal requirements for patentability– Checklist of statutory
obligations for both invention and way patent is written
• Only market determines business value of invention
Copyright: The Lean Legal Team 2013
Patent Business BasicsPatents as a Property Right
• Not a monopoly• A right to exclude– Broader
• Can use• Not use• Keep others from doing
what they would otherwise be free to do
• No right to practice the invention claimed– Inventor can be
blocked by other’s patent rights
Copyright: The Lean Legal Team 2013
Patent Business BasicsWhat are Patent Owners Rights?
• Improvements existing patented inventions also patentable
• “Improvement” patents
• If best way to practice underlying invention, can stop first inventor
• Someone else can improve on your patented invention and stop you so you are both blocked from using your own inventions
Copyright: The Lean Legal Team 2013
ALTERNATIVES TO PATENTS
Copyright: The Lean Legal Team 2013
The IP Toolbox
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Other Ways to Protect Business Ideas“The Regulars”
• Trade secret protection– Good when idea cannot be
reversed engineered• Coke® formula,
customer lists– Can be licensed or sold,
but harder because often not well-recorded
• Trademark protection– For some business ideas,
strong trademark protection more valuable than patent rights• UPS: “What can Brown
do for you”
Copyright: The Lean Legal Team 2013
Other Ways to Protect Business Ideas“The Regulars”
• Copyright protection– Good for software /logos– Statutory damages of at least
$100K available if register prior to bringing suit
• Design patent protection– Protects ornamental aspects of
invention– Can exist with utility protection– Recent case law make stronger
• But not as strong as utility patents
– Inexpensive and quick• < $2K and typically 1.5 years
or less from filing to issue
Copyright: The Lean Legal Team 2013
Other Ways to Protect Business Ideas“Not So Regulars”
• Ride on coat-tails of another patent– Strategic alliances, joint
ventures• Ex: If supplier has
patent to raw material and you obtain exclusive rights to use , can be almost the same as obtaining own patent
• Commercial relationships– Contractual-based market
exclusivity• Many others!– Will be market and
product specific
Copyright: The Lean Legal Team 2013
Other Ways to Protect Business Ideas“Not So Regulars”
• First Mover Advantage– Sometimes first to market
ends up effectively owning the relevant market, especially when• Limited distribution
opportunities; • Short shelf life; or • Only enough customers
for 1 supplier• Customer Traction– “Traction is the new IP”– Build recurring revenue
that is “sticky”
Copyright: The Lean Legal Team 2013
THE BAD: PATENT REALITY CHECK
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Who Makes Money from Patents?
0
10
20
30
40
50
60
70
80
90
100
Patent Lawyer USPTO Entrepreneur
% P
rob
ab
ilit
y t
hat
$
Ob
tain
ed
Copyright: The Lean Legal Team 2013
Complete this sentence
• When all you have is a hammer, everything looks like a _________.
Copyright: The Lean Legal Team 2013
For Patent LawyersPatents are Business
Copyright: The Lean Legal Team 2013
Do You Really Know What a Patent is Good For?
• Many assume patent are necessary step for business– Could be waste of
resources• Money and time
• Many assume that not necessary to create business value– Often wrong
• Lose exclusivity in successful business model
Copyright: The Lean Legal Team 2013
Patent Business BasicsMost Patents Worth Little
• Very few patents worth what people think they are– Cover invention
that no one will buy
• Don’t understand underlying value proposition– Is there IP?
Check.– False sense of
security
Copyright: The Lean Legal Team 2013
Patents: Not What People Think They Are• Does not guarantee invention
is valuable– Government recognition
that idea meets legal requirements of invention
– Free market/business savvy determines actual value
• If business value in idea, then patent might be necessary (but not always)– Do we “fetishize” patents?
• Most filed before a marketable product– Issued patent often does
not cover actual product– Lawyers recommend early
filing for legal protection, but this often ignores business realities
Copyright: The Lean Legal Team 2013
What You Need to Know Before Filing• Contract with government
– Patentee discloses trade secrets in exchange for limited exclusive rights
• Repudiation of trade secret protection– Must “open the kimono”
• Patentee obligated to be truthful– Disclose all information
known about invention• Relevant times
– 3-7 years from filing to issue– Lasts 20 years from date of
filingCopyright: The Lean Legal Team
2013
• Must be filed within 1 year of 1st public use or sale– Some flexibility– Timing relates to THE invention
• Substantial ability to delay filing if strategic about process
• More patents not necessarily better– 1 with commercially broad
claims enough• Must “cover the innovation
not just the invention”
What You Need to Know Before Filing
Copyright: The Lean Legal Team 2013
• Costly– Minimum of $10K for simplest
technology– $20K or more of moderately
complex cases– Foreign filing in top line
countries can easily end up costing $250K or more
• Lengthy – Today average pendency in
US is 3 years or more• Significantly longer in
foreign countries– No protection until issuance– Market often exhausted by
time patent issues
What You Must Know Before Filing
Copyright: The Lean Legal Team 2013
• Systemic problems in Patent Office enhance difficulties– Even the most carefully
drafted and skillfully prosecuted may never issue
– Costs cannot be recovered if patenting efforts ultimately fail
What You Must Know Before Filing
Copyright: The Lean Legal Team 2013
What You Must Know Before Filing
• When are Patents Worth $$?
• When a current or future viable business model is covered by the claims– Yours– Someone else’s
• No business model coverage = $ 0 value
Copyright: The Lean Legal Team 2013
• But, even if viable business model and patentable, there are times when don’t want patent– Will someone copy?– Do you care?– Can you use
defensively against others?
– Interest in monetizing?
• Key inquiry: What is ROI of patent to total value of opportunity?
What You Must Know Before Filing
Copyright: The Lean Legal Team 2013
What You Need to Know Before Filing• For patent attorneys risk
arises when clients wait to file– “File early and often”– One type of risk
• For entrepreneurs, risk arises for waiting AND for filing before business model validated– Must balance risks
Copyright: The Lean Legal Team 2013
Patent Business Basics: Patents as Currency
• Patents have transactional value when cover business model and marketplace exists– Relatively few
business areas buy and sell today• Technology• Biotech/Health
– Others non-existent or still emerging• CPG• Chemicals• “Stuff you drop
on your toe”
Copyright: The Lean Legal Team 2013
Key Takeaways• To determine whether you need
to generate your own patents or acquire from outside– 1) Identify business model
(product, service etc.)– 2) Determine whether patents
needed to obtain maximum value from this business model or if it is likely that competitors will use patents offensively against you
– 3) If yes to #2, generate or acquire
– 4) Put business team in charge of execution and make accountable
– 5) Repeat regularly
Copyright: The Lean Legal Team 2013
THE UGLY:PATENT STRATEGY CASE STUDY
Copyright: The Lean Legal Team 2013
Case Study: Invention vs. Innovation• Invention: 1st viable
“hands free” dispenser• Innovation: Hygienic way
to dry hands in public place
• Invented from scratch– Sensor was key aspect
• 25+ patents on invention• Created market demand• Competition reacted by
designing around– Now 6+ different options– Price eroded market
Photo: GP.comCopyright: The Lean Legal Team
2013
• What kind of claims should GP have sought?
• What was innovation?
• Why do customers buy?
• How would competitors compete?
Case Study: Invention vs. Innovation
Photo: GP.com
Copyright: The Lean Legal Team 2013
Innovation vs. Invention• For platform products,
patent coverage must be innovation focused– Problem not just solution
• Most patents only latter
• Take out of silo of inventor and patent attorney– Traditional viewpoint
• Business team and others must be involved in patenting process– How would others would
solve consumer problem?– Use your efforts as a
roadmap?Copyright: The Lean Legal Team
2013
Final ThoughtsHow to End Up with A Fist Full
of Dollars
Getting Your IP Right
IP Strategy is Business Strategy• Why you are protecting IP depends
on your business plansIP Procurement is Legal Strategy• How IP obtained depends on legal
issues • Proceed only if will allow successful
execution of business strategyCopyright: The Lean Legal Team 2013
Getting Your IP Right
Business leaders need to learn enough about IP process to be able to align business goals with IP efforts• Lawyers can guide the process, but must
not drive the process
IP Strategy (and intangible asset strategy) is critical feature of generating exit value• Just because “they don’t teach it in B-
school” doesn’t mean that IP is not the job of business people!
Copyright: The Lean Legal Team 2013
Identifying Intangible Asset Value
• 1. What makes YOUR business different from its competitors?– What is your unique competitive
advantage?• Identify each and every one
• 2. Would YOUR business be harmed if this difference was lost to a competitor?– If so, you must capture and protect it so
that you can realize it!
• Important qualifiers– Copying is legal and appropriate if you
don’t protect your competitive advantage– Some things are not protectable, but
knowing this is the case allows you to plan accordingly
Copyright: The Lean Legal Team 2013
Possible Sources Competitive Advantage
Your Busines
s’ Intangi
ble Asset Value
Patentable
Inventions
Trademarks
Brand Equity
Business
Processes
Customer/
Suppliers
Employees
Others Specific
to Business Model
Copyright: The Lean Legal Team 2013