26 Jul Save money through smart patenting
Companies tend to have a good grasp on their tangible property. They know their real estate holdings and understand the value of their products. On the other hand, they tend to overlook the value of their intellectual property. Companies may understand that inventions could generally have some value to them, and may even understand that it is possible to obtain patents on those inventions. However, often companies lack a complete understanding of the precise value of intellectual property (particularly patents) and do not have a sound strategy for acquiring protection for their intellectual property. Because of this, companies will often expend significant resources protecting their intellectual property with very little return. Particularly, a misguided approach to analyzing and securing patents wastes enormous sums of time and money.
An experienced and knowledgeable patent attorney will help companies properly evaluate their intellectual property needs and make efficient use of their intellectual property budgets. In the long run, a sound and organized approach to evaluating and acquiring patents will save a company money.
There are many ways skilled patent attorneys can save their clients money. Among those, two particularly important cost-saving measures are due diligence and sound strategy.
Broadly, due diligence refers to the efforts a company is expected to take before entering into an agreement. A company is expected to “do its due diligence” to determine whether entering into an agreement is in the company’s best interests. In the realm of patents, this becomes particularly important when a company is interested in purchasing intellectual property.
The typical patent transaction involves one company buying or licensing a patent or portfolio of patents from another company. It is apparent that the buying or licensing company will want to know the value of the patents before buying/licensing them. Nevertheless, often the buying or licensing company does not have a good handle on the patents’ value and enters negotiations in a vulnerable position. The result is that the buyer/licensee often ends up spending significantly more for the patents than they are worth. The buyer/licensee can even end up owning or licensing patents that have little to no value to them.
The key to successfully purchasing or licensing any patent is due diligence. With the help of a patent attorney, the buyer/licensee can fully understand what it is buying and what its purchase is worth. In analyzing patents before they are purchased, a patent attorney will ensure that the patents are properly owned and valid. In some cases, poorly informed companies may try to buy patents from sellers that do not own all of the patent rights. Obviously, this not only greatly impacts the value of the transaction, but can create problems for the purchasing company down the road. Understanding issues of ownership and patent validity are an important part of due diligence and will often save a buyer of a patent large sums of money in the long run.
Another extremely important aspect of due diligence is evaluating the scope of the patent. Companies often enter into agreements to buy or license patents that have very little value to them. This is a result of not fully understanding the scope of the purchased/licensed patents. The metes and bounds of a patent are defined by the claims. The claims are the numbered paragraphs at the end of the patent. The drawings and the written description of the invention do not define the invention’s scope. Companies will often look at the drawings and written description to determine whether a patent has value. But, the only way to truly understand the value of a patent is to have a patent attorney evaluate the patent’s claims. Having a patent attorney review the patent and its claims gives the buyer/licensor a solid evaluation of the patent and its value to the buyer/licensor so that they are in the best possible position from which to negotiate the purchase/license.
Patent attorneys can also add value by establishing a sound patent strategy. Companies that understand, at least minimally, the significance of intellectual property know that obtaining patents on their inventions is important. These companies will hire patent attorneys to apply for patents on their inventions. However, an often overlooked part of aining patents is establishing an overall patent strategy. Once a company decides to patent its inventions, it may begin patenting every product or product improvement it creates. A sound patent strategy needs to be established with an understanding of what a patent will do for a company.
A patent gives a company a market advantage by giving its owner the right to exclude others from making, using, selling or importing the patented invention. However, unless a company foresees: 1) suing a competitor for infringement of its patent, 2) licensing the patent to others or 3) intimidating others from entering the market because of the patent, a patent may not have significant value to the company. In making decisions on whether to file a patent application in the first place, it is important that a company have a clear vision of how the patent will give it market advantage in the future. Armed with this vision, a company can make better decisions about how to spend its intellectual property budget and will see the greatest return on that budget.
Good foreign patent strategy can save companies money. As previously noted, a patent excludes others from making, using, selling, or importing the patented invention. If a foreign competitor is manufacturing a product overseas, but selling it in the United States, they can be sued for patent infringement in the United States. If a U.S. company is manufacturing a product in the United States, but is only selling it abroad, they still can be sued for patent infringement in the United States. This is important because companies will often think they need a foreign patent to combat competitor sales or manufacturing in foreign countries. However, if those competitors are manufacturing or selling their products in the United States, a company will almost always benefit by suing its competitor in the United States, rather than overseas.
A foreign patent will typically be used only to combat competitors that manufacture and sell only in foreign countries. For example, if a German competitor does all of its manufacturing in Germany and all of its sales are in Europe, foreign patents will be needed. A U.S. patent will only be of value in combating a competitor if the competitor makes, uses, sells or imports in the United States. Accordingly, it is important that a company have a solid strategy for dealing with foreign competitors. Foreign patents can be very expensive to obtain and enforce. Therefore, specifically targeted foreign patents that a company knows ahead of time it has the means to litigate, that it knows have licensing value or that it knows will intimidate foreign competitors, are much more valuable than a foreign patent portfolio that employs a shotgun approach and attempts to obtain patent protection in all of the far reaches of the globe. There are numerous considerations to be made when establishing a patent strategy, both foreign and domestic. With the help of a skilled patent attorney, a company will implement an intelligent and efficient strategy that will actually save it money in the long run.
Toby Reynolds is a member of Michael Best & Friedrich’s Intellectual Property Group. Reynolds’ practice focuses on patent litigation and all aspects of patent prosecution involving mechanical subject matter. Toby can be reached at 414-225-2796 or firstname.lastname@example.org
This article originally appeared in the April 30, 2004 issue of the Small Business Times.
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.