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ROBERT L. CANTRELL

OUTPACINGTHE

COMPETITIONPatent-Based Business Strategy

and guard their patents, and breaks down three key learning points about patent strategy: understanding what patent strat-egy is, winning the race of decision cycles, and mastering the interplay of interaction and isolation that occurs between com-panies through patent transactions and enforcement.

Patents provide a brief window of opportu-nity for companies to enforce the exclusiv-ity of their inventions before competitors are able to imitate their ideas. As the most quantifi able of intellectual property assets, patents are the cornerstone of a new type of business strategy that, while practiced, has not been adequately described. Until now.

Required reading for business professionals and attorneys, Outpacing the Competi-tion delivers much-needed guidance in developing business strategy that lever-ages the competitive advantages afforded by patents.

ROBERT L. CANTRELL is a professional strategist and Director of Consulting at Landon IP, Inc. He has managed multiple consulting and analytical engagements across a wide range of technology sectors that include the communications, elec-tronics, medical devices, pharmaceuticals, energy, and consumer goods fields. For Landon IP customers, Mr. Cantrell man-ages patent analytical projects, innovation and IP strategy sessions, and advanced training courses. He is on the faculty of Patent Resources Group (PRG), the lead-ing provider of advanced patent education to the legal and business communities. His core expertise in classical strategy has been proven to have wide applicability across many professional disciplines.

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“Outpacing the Competition provides a useful IP management frame-work for rapidly evolving and inherently unpredictable R&D environ-ments where companies are partners, customers, and competitors at the same time.” – Marshall Phelps, Corporate Vice President for

IP Policy & Strategy, Microsoft

“Robert Cantrell’s book Outpacing the Competition: Patent-Based Business Strategy should be read by anyone involved in the practice of litigating or licensing patent rights or policymakers responsible for patent issues. Mr. Cantrell provides a cogent approach for applying decisional methodology and game theory to enhance the utilization and understanding of patent rights.”

– Bradley J. Olson, Esq., patent attorney, Washington, DC

“Robert Cantrell makes a compelling case for using intellectual property as a core for building solid business strategy. He provides a unique and valuable perspective on competitive advantage, as delivered through patent-based business strategy. This is an excellent addition to anyone’s business strategy arsenal.” – Jeff Hovis, Managing Principal,

Product Genesis, Innovation Genesis LLC

“Robert truly treats patents and related intellectual property as both a weapon and a shield to help the reader use patents to out-maneuver global competitors of all kinds—the low-cost producer, the high-end innovator, etc. CEOs, attorneys, business and engineering professionals and the like will enjoy the military imagery and flavor provided by Robert. Thanks for clarifying how critical it is to have an understanding of patents in running a truly competitive global business today.” – José W. Jimenez, Esq., Chief Intellectual Property Officer,

AMS Research Corporation

OUTPACING THE COMPETITIONPatent-Based Business Strategy

In the fi eld of patents, there are still innumerable treasures that have not been unearthed; they are hidden in

the patent fi les of a company, or more likely, in the minds of brilliant researchers waiting for the right connection of ideas and support.

Taking the mystery out of patent strategy for business management, Outpacing the Competition explores the business dynam-ics behind creating, acquiring, advancing, and defending patentable assets. Reveal-ing the dynamics central to winning the competition for ideas and relation-ships through which companies derive successful products, this innovative book puts patentable assets, the core value of technology companies, at the center of a broader business strategy discussion.

Combining business strategy with legal and classical strategy, Outpacing the Com-petition makes it clear how professionals can and should integrate patents into all aspects of business strategy in order for an organization to achieve its full fi nancial potential, with discussion of:• Emergent treasures: the creation and

acquisition of valuable inventions from bright people

• Ways to organize and use non-obvious advantages from the point of view of patent strategy

• The ongoing decision cycle of assessment, decision, and action

• The race of decision cycles in determining business tempo

• Patents as a key driver of business growth for companies

• The proven strategy models that illustrate how patents work

Filled with case studies and real-world anecdotes, this strategic guide equips professionals with tools to cultivate, grow,

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Praise for

OUTPACING THE COMPETITIONPatent-Based Business Strategy

e1ffirs01 Date: Jan 20, 2009 Time: 6:7 pm


Outpacingthe

Competition

Patent-BasedBusiness Strategy


Outpacingthe

Competition

Patent-BasedBusiness Strategy

Robert L. CantrellLandon IP, Inc.

John Wiley & Sons, Inc.


Copyright © 2009 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmittedin any form or by any means, electronic, mechanical, photocopying, recording, scanning, orotherwise, except as permitted under Section 107 or 108 of the 1976 United States CopyrightAct, without either the prior written permission of the Publisher, or authorization throughpayment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the web atwww.copyright.com. Requests to the Publisher for permission should be addressed to thePermissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030,201-748-6011, fax 201-748-6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used theirbest efforts in preparing this book, they make no representations or warranties with respectto the accuracy or completeness of the contents of this book and specifically disclaim anyimplied warranties of merchantability or fitness for a particular purpose. No warranty maybe created or extended by sales representatives or written sales materials. The advice andstrategies contained herein may not be suitable for your situation. You should consult with aprofessional where appropriate. Neither the publisher nor author shall be liable for any lossof profit or any other commercial damages, including but not limited to special, incidental,consequential, or other damages.

For general information on our other products and services, or technical support, pleasecontact our Customer Care Department within the United States at 800-762-2974, outsidethe United States at 317-572-3993 or fax 317-572-4002.

Wiley also publishes its books in a variety of electronic formats. Some content that appearsin print may not be available in electronic books.

For more information about Wiley products, visit our Web site at http://www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Cantrell, Robert L.Outpacing the competition: patent-based business strategy/Robert Cantrell.

p. cm.Includes bibliographical references and index.ISBN 978-0-470-39085-6 (cloth)

1. Strategic planning. 2. Patent practice. 3. Competition.I. Title.

HD30.28.C362 2009658.4 ′012–dc22

2008045555

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

www.wiley.com/go/permissions

www.wiley.com

ftoc Date: Jan 29, 2009 Time: 8:56 am

Contents

Foreword xiPreface xiiiAcknowledgments xixAbout the Author xxiiiOrientation xxv

Chapter 1 Introduction 1Strategy Defined 4Results 6Reasons for Unpredicted Results 7Patent Strategy Defined 16Value Capture 17The Nature of a Strategic Solution 20Opposites 23Strategic Inaction 24Strategy and Change 25The Perfect Strategy 27The “Good-Enough” Strategy 29

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Strategic Risk 31Competitive Risk 33

Chapter 2 Decision Cycle 37The Question of Cost 38Invention Review List 40Four Rules of Patent Strategy 42The Definition of a Decision Cycle 46

Chapter 3 Assess 49Defining the Problem 52Problem Resolution 57

Synthesis 59Identifying the Opposition 61

Why Opposition Exists 61What Do We Do That Is “Evil”? 62An Illustration of “Evilness” 63“Evilness” Exercise 66Why We Act 69What We Want 70Independent Action 72Cooperate or Compete 73

Evaluating Resources for Cooperate-or-Compete Decisions 76

Valuation and Return on Investment 77Application of the Patent Resource 80

Centers of Excellence 84Federal Express as a Centers-of-Excellence Model 88

Parallel Lines of Competition 90All Aspects of Power 93Standing on a Whale, Fishing for Minnows 94

Dominant and Contested Positions 95Sanctuary and the Dominant Position 101In Summary 102

Chapter 4 Decide 105Defining the Goal 107

Definition of “B” 107Strategic vs. Technical Solutions 109

Fundamental Competitive Strategy 110Fundamental Competitive Strategy, the Objective,

and the Desired Result “B” 112


Contents vii

How to Be Proficient at Decision Making 114Leveraging Conditions 122Developing the Situation 123

Four Key Effects: Eliminate, Isolate, Interact, Negate 126Competitive Equilibrium and Disequilibrium 131

Equilibrium 131Disequilibrium 134A Sample Cause and Effect Sequence 140

Leveraging the Three Centers of Excellence WhenCrafting a Strategy 141

Where We Cooperate and Compete 141Innovation 142

Four Innovation Approaches (Solution Quadrants) 142Solution Quadrants Illustration 144Skating Where the Puck Will Be 147Henry Ford 150Altshuller’s Laws of Technical Evolution 151Altshuller and Ideality 155The Optimal 156Profiting from the Trend Toward the Ideal

and the Optimal 159From Inventions to Solutions and the

Technology Life Cycle 163Advancement 166

The Sales Advantage 166Saleable Benefits 167Advantages 171A Degree of Separation 173

Security 175The Primary Utility of a Patent 175The Ultimate Security Advantage 176The Ideal Patent 179A Counterintuitive Result 181Links within Claims 182Links to Other Patents 186Links to Other Resources 187Parallel Lines of Competition and Security 192A Final Word on Asymmetry for Planning 200Reciprocal Response 202Patent Quality 202


viii c o n t e n t s

Drafting a Strong Patent 204Position Survivability 205The Dominant Patent Strategy 214Final Word on Decision 228

Section Summary 229

Chapter 5 Act 233Acting on the Goal 234Acting Competitively 236Mentally Prepare to Adjust 237Categorize and Track Resources 240Four Operational Tenets 241

Four Operational Tenets Defined 241Operational Tenets: A Summary 243Multidimensional Considerations 245Balance 250Multidimensional Considerations: Additional

Notes 253Freedom of Action Enhancements 255

How to Be Proficient at Operations 257A Case of Free Value 258Account for Change 259

Tempo 260Decision Cycle and Tempo 261Col. John Boyd 262Factors of Importance re: Tempo 265Levels of Adaptation 266

The Luck Factor 269Qualifying the Result 271Act: A Summary 272

Chapter 6 Connecting the Loop 275The Invention Review List 276Prior Art Search 278Invention Elicitation 278The Invention Audit 281

Chapter 7 Two Imperatives 283Imperative 1: CEO Involvement 283

The CEO and the Patent Line of Competition 286Bill Gates and Patents 287


Contents ix

Imperative 2: Master the Fundamentals 288AWAKE CycleTM From Fundamentals

to Exceptional Strategy 290

Chapter 8 High-Tempo Patent Strategy 293Set Common Viewpoints 294Measure the Control of Technical Space 295

Advanced Creativity Techniques 297Psychological Protections 298

Accelerated Invention (TRIZ Example) 301Conduct Invention/Patent Infiltration 303Necessary Adjustments 304High-Tempo Patent Strategy Advantages 305

Chapter 9 Conclusion 307

Appendix IP Strategy Boarding and Scenario Play 309Endnotes 319

Orientation 319Chapter 1 Introduction 319Chapter 2 Decision Cycle 321Chapter 3 Assess 322Chapter 4 Decide 324Chapter 5 Act 328Chapter 7 Two Imperatives 330Chapter 8 High-Tempo Patent Strategy 330Chapter 9 Conclusion 330Appendix IP Strategy Boarding and Scenario Play 330

Index 331

E1FBETW Date: Jan 20, 2009 Time: 6:11 pm

Foreword

This latest book from Robert Cantrell and Landon IP is an attemptto further the understanding of the strategic use and nonuseof patents to achieve a larger business purpose. Having edited

our previous book from Landon IP, I know how hard it can be to saysomething meaningful and to say it succinctly. The treatise Outpacing theCompetition: Patent-Based Business Strategy is no exception.

Robert Cantrell, who leads our patent consulting operation, hasworked hard throughout his career to raise the awareness of the businessvalue of patents while providing tools and heuristics for assessing yourIP strategies and that of your competitors. He has often worked at theedge of the industry where few people understand or appreciate what isseemingly esoteric. Fortunately, he has transformed and related many ofthese concepts over time, and applied them in our consulting practice.He has made “the difficult” more mundane and useful to organizationsand individuals worldwide.

As context for the book, Landon IP is the largest patent search andIP analytics company in the United States. As of 2009, the companyemploys 185 full-time professionals across a wide range of technologicaldisciplines. A large and growing amount of our revenues is the result of

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xii f o r e w o r d

analyzing patent and technological information for businesses and lawfirms, and providing them with strategic options. We research patentportfolios in both emerging and developed technologies, and we helpcompanies predict the behavior of their competitors with respect totheir intellectual property. The company also teaches scientists, engi-neers, and business managers how to conduct patent analysis, maximizethe value of their intellectual property holdings, and understand wherefuture technological and business opportunities may exist.

To this extent, Robert Cantrell is a unique figure in the intellectualproperty field. He is one of the few practitioners who are relentlesslyfocused on improving the tools and techniques for making good intel-lectual property decisions. This is no easy task, as few individuals in thebusiness world truly understand the strategic value of patents or patent-ing. Still fewer individuals have tools at their disposal to put this endeavorinto successful practice.

It is our sincere hope that you will benefit from this treatise on patentstrategy for business purposes. We expect that this book will generatesignificant thought and research, along with increased understandingand proliferation of patent-based business strategies. Robert and I wouldlove to hear from you as you read or apply the principles and approachesespoused in the book.

Thank you for taking an interest in this important work.

David Hunt, CEOLandon IP, Inc.

Alexandria, Virginia USAJanuary 1, 2009

E1FPREF Date: Jan 29, 2009 Time: 9:4 am

Preface

This book, Outpacing the Competition, is about business strategy.I have written it, however, from the perspective of one com-ponent of business strategy: patent strategy. Patents are one of

the primary tools that research and development-based companies use toestablish and maintain their brands in the marketplace. Patents provide awindow of opportunity for companies to enforce the exclusivity of theirinventions before competitors have the opportunity to copy their ideas.If companies take advantage of this opportunity, they will have estab-lished their brands for the patented technology by the time competitorscan enter the marketplace, and can use those brands as platforms to fundand launch their next generation of patented inventions. Still, despite thisleading role of patents in business strategy, in addition to their variousother valuable roles in innovation and collaboration, patents and patentstrategy are practically absent from leading business strategy texts. Thisbook intends to address that absence by providing a business strategytext where patents are up front and center, and then explore some newterritory in strategy that has so far been little discussed in business circles.

This book, although it is centered on patents, combines businessstrategy with legal strategy and classical strategy (political, military, and

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survival strategies associated with the human condition) to create a com-prehensive picture of all aspects of a company’s power to advance itsproducts and services into the marketplace. This reflects the nature ofpatents as documents on one hand concerned with the minutiae of indi-vidual inventions and on the other hand often the drivers of multibilliondollar flows of economic value from the sale of products, services, andcompanies. Patents are macro and micro simultaneously. The flow offortunes can depend on the interpretation of just a few words within apatent’s claims.

Further, an underlying theme of this book is the race of decisioncycles that determines business tempo. Companies use tempo to succeedin highly contested but valuable fields by proficiently executing strategyat a pace faster or slower than competitors can cope. The competitivedynamics of business are currently as tough as they have ever been, andwill likely grow tougher as more and increasingly capable companiesenter the marketplace from the diverse global economy. Using tempo tooutpace the competition is an important way to address this challenge.

To illustrate the ideas presented in this book, I draw from manysources both inside and outside the business world. This approach is inkeeping with an insight I gained some time ago when I was in the Army.That insight is that new ideas and change originate at the borders. Inthe Army, borders typically meant where countries and cultures cametogether. In this book, borders mean the linkages in thought betweendifferent professional disciplines, different functional entities within orga-nizations, and in some cases, different sciences. My own career has verymuch resided at the borders of many professional disciplines as a providerof products or services that solve problems. Throughout most of mycareer, I have been paid to create, sell, and implement solutions. I believeI have succeeded here by stepping into the shoes of my customers, learn-ing how they perform their jobs and then helping them to perform theirjobs. Nothing allows you to solve problems better than experiencing anddeveloping your solutions from the point of view of your customers.

I have had a unique opportunity to work with some of the best-performing people in many professional disciplines. These include toplawyers in the legal profession, top business people in the professionsof business, top military professionals from all service branches, and topscientists in research and development professions. I have also worked


Preface xv

with top intellectual property managers who tend to have at their rootone or more of the aforementioned four professions, and whose jobentails helping people from all backgrounds to benefit from the patentfield and intellectual property as a whole. Intellectual property managersalso work at and cross the borders between professions and can readilybe both identifiers and creators of new ideas and change.

My own entry into the intellectual property field started by acci-dent at a crossroad between careers. In October of 1993, I made whatI thought would be a short career pit stop out of the financial indus-try. I found a sales position at a patent information company, DerwentInformation, where I planned to work until I sought a full time MBAthat following September. The move to Derwent Information providedme with the unanticipated benefit of having free access to the DerwentWorld Patents Index (DWPI). The DWPI was the main product that Isold to Derwent Information customers.

The DWPI is a proprietary and indexed collection of several millionglobal patent abstracts that, in the 1990s, only the largest companies couldafford to use on a regular basis. Having free access to this database meantthat I could run statistical experiments on the data within the DWPI thatwould have been cost-prohibitive for Derwent Information customersto perform. These experiments greatly accelerated my learning curveas a new entrant into the intellectual property industry. By February of1994, I gave my first patents and competitive intelligence presentationto Becton Dickenson in New Jersey. That presentation attracted most ofthe company’s legal counsel at that office. Within two months, I gave thesame talk to three other major companies. Recognizing an opportunity,I arranged to seek my MBA at night and stayed in the patent informationindustry.

My time in the patent information industry has offered many chal-lenges. Overall, it has been an exciting and rewarding 15 years duringwhich I have had the opportunity to meet and work with many greatpeople and to travel around the world. In my field, I have worked withpeople in all the major positions associated with patent strategy. Theseinclude CEOs, heads of research and development, corporate coun-sel, outside counsel, intellectual property managers, individual inventors,all manner of consultants, competitive intelligence professionals, licens-ing executives, accountants, investment bankers, corporate librarians,


xvi p r e f a c e

patent searchers, patent analysts, patent agents, patent liaisons, andsalespeople.

I learned a number of things along the way. One is the limited utilityof knowledge as a business tool unless that knowledge draws people toimportant solutions to their problems. A second is the high utility of onearea of professional knowledge—the fundamentals of strategy—in cre-ating the insight needed to understand problems, see opportunities, andfind sought-after solutions. A third, which stemmed from the previoustwo, was a complete disassociation from binary thinking of black andwhite, good or bad, competitor or facilitator, in that almost every event,organization, and person ultimately is a little of both.

These three insights would come into play when the time came towrite this book. First, patents, as quantified knowledge, provide theirgreatest value to the extent that they solve real problems and thereforedraw people and resources to their owners and implementers. Second,patents, by affording their owners the right to enforce exclusivity oninventions, provide a tool from which to execute fundamentals of strategyas they apply to business. Third, patent strategy occurs in a world shadedin gray where patent positions are rarely either totally competitive orcooperative in regards to other patent owners, and where any patentowned by any entity may serve as a tool to advance your own business,if you properly manage the conditions that can make that so.

In 2005, after a short hiatus from the intellectual property field andinto the defense and healthcare world, I met Dave Hunt, CEO of LandonIP, Inc. Landon IP, Inc. at its core, is a patent search and informationcompany that is often tapped upon to do much more for its customersin order to identify research and development opportunities and preparefor patent litigation. Dave needed someone who could address thesemore involved projects for Landon IP, Inc. Our work complementedeach other. Landon IP, Inc. offered an unparalleled pool of technologyexperts from which to draw in order to create project teams to turn ideasinto results.

My work for Dave has been various, and has ranged from the highlystrategic, such as pioneering Landon IP’s entry into Japan, to the highlytactical, such as market development and lead generation. Along theway, I have had the opportunity to give patent strategy courses and runinnovation workshops for some of the best and the brightest people


Preface xvii

in the business. Dave has been gracious in allowing me the time andopportunity to prepare this book. This book has been a long-termpersonal goal since I became acquainted with this industry.

Much of the material in this book has been refined over the lastthree years at Landon IP, Inc. through seminars and workshops we havegiven at customer sites and through patent strategy courses I taught atPatent Resources Group. All of this material has been used in practice byLandon IP, its customers, or both, and in fact stems from solutions devisedfor real world problems. The material has been developed specifically forpatent strategy based upon fifteen years of working with people at overone hundred major corporate intellectual property centers worldwide.These intellectual property centers have shown us both the best andworst practices of practitioners of the intellectual property arts and sci-ences, and their consequences to business. One of the universal signsof success that we saw was the capacity of winning patenting organiza-tions to outpace their competitors from many different angles so that they,not their competitors, have the greatest influence on the market situation.That led to the title of this book.

As a last note to readers regarding the many case examples in thisbook, because many of the case examples have a legal component, thereare always confidential details about the intended strategy of the partic-ipants that I or any other outsider could not access. So these cases areobservations based upon the information available to me at the time ofwriting. In any real life event, there is always what apparently happenedand what really happened, and often only the insiders will ever knowthe latter. I learned about this in real time from a question on my lastMBA final exam. The question asked why the ROLM telecommuni-cations merger with IBM failed. Since I worked at ROLM during thattime when IBM sold ROLM to Siemens, I knew a lot about what reallyhappened, down to the influence of personalities and personal agendasin the situation. I answered the question as such, and proceeded to havethe entire answer marked wrong by the professor, at least until I had theopportunity to explain. So if you are an insider on any case examplethat appears in this book, I would love to hear more that you can dis-close about what really happened if it is appreciably different from thepresented interpretation shown here for future updates of this book.

E1FLAST01 Date: Jan 20, 2009 Time: 6:12 pm

Acknowledgments

Ihave been making notes on topics that would appear in this booksince my time with the 101st Airborne Division starting in 1987.I had the good fortune to become acquainted with the intellectual

property industry shortly afterward because it allowed me to draw on anddevelop a diverse range of skills, from classical strategy up to the latest ininnovation sciences. To list everyone who has influenced my work onthis book, therefore, would take many pages. I would, however, like tooffer special thanks to Dave Hunt, the CEO of Landon IP, Inc., whoafforded me the time and the platform from which to write this book.Dave has a strong sense of how to run a business, and he has grownLandon IP, Inc. from a company of 9 people to a company of nearly 200during the past 10 years. He has shown the courage in business to trynew ideas and the willingness and skill to make the adjustments neededto see those ideas succeed.

I would also like to offer a special thanks to Marshall Phelps, Corpo-rate Vice President, IP Policy and Strategy at Microsoft, and Brad Olson,Counsel at Dickstein Shapiro, who I asked early on to peer review thefirst draft of the final manuscript. They did two things that were veryhelpful. To start, their business and legal advice was first rate and key

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to my efforts to tighten and refine the messages in this book. Second,their phenomenally fast turnaround with their reviews provided me witha critical window of opportunity to research their suggestions and putthem into the book.

In addition, I would like to thank Jose Jimenez, Jeff Hovis, Paul Gard-ner, Mark Connolly, Tony Handel, Ed Kahn, and my father RobertCantrell all of whom provided me with great insight and advice onimportant matters in the text of this particular manuscript. Jose Jimenezis the Chief Intellectual Property Counsel at AMS Research Corpora-tion who reviewed the manuscript and provided insight both on where Icould tighten the manuscript and where I made important points that Icould further emphasize. Jeff Hovis, the Managing Principal at ProductGenesis, reviewed the main body of the text. Jeff both offered importantnew advice and confirmation regarding important refinements suggestedby earlier readers. Paul Gardner is the Academic Director of PatentResources Group and Mark Connolly is the Global Director—Patents& Intellectual Property at DuPont. Both reviewed the Orientation sec-tion of this book, which is a patent primer for business people suggestedfor inclusion by Marshall Phelps. Tony Handel, Partner and patent lit-igator for Thomson Hines, and Ed Kahn, consultant on the businessside of intellectual property, have both participated with me in givingpatent strategy courses through Patent Resources Group and have bothinfluenced this material directly. My father, Robert Cantrell, is a retiredIBM executive on the sales and marketing side who also has extensiveexperience in international operations with Siemens. He read this mate-rial from the perspective of someone with absolutely no background inpatents so that I could clarify anything that might not make sense topeople outside the industry.

I would like also to thank my colleagues at Landon IP, Inc. and PatentResources Group, with a special note of appreciation to Jeremy Hargis,as well as to Debi Dandridge and Susan Mathis. Jeremy Hargis is a PatentSearch Trainer at Landon IP, Inc. who worked in intellectual propertymanagement for the automotive industry. He conducted a deep andcontributory editing to the first draft of this book based on his day-to-day experiences in industry. This was no small task, which he performedover several months between his primary duties. Debi Dandridge andSusan Mathis from Patent Resources Group also made several reviews of


Acknowledgments xxi

the text for editing purposes leading up to each of the Patent ResourcesGroup courses, in which earlier drafts of this text were used as coursematerial. I would also like to offer my thanks to the many customersand colleagues with whom I have worked on matters outside this book,several of whom because of their corporate policy cannot be named herebut who certainly influenced the material inside.

I would last like to offer my gratitude to the late Col. John Boyd, AirForce fighter pilot, and later classical strategist, who I have never met butwho I feel I know and whose ideas have also greatly influenced this work.A colleague of mine, Richard Taylor, from Taylor Rodgers, introducedme to John Boyd’s work when he saw a commonality between Boyd’spapers and my first book, Understanding Sun Tzu on the Art of War. Boyd’swork, his own published intellectual property, accelerated my work goingforward and allowed me to complete this book expeditiously. We haveall been students of the work of Sun Tzu, a famous Chinese classicalstrategist from 2,500 years ago, whose teachings and wisdom have stoodthe test of time.


About the Author

Robert Cantrell is a strategist who has contributed ideas andobservations to a wide range of professions that include intel-lectual property, the focus of this book, as well as military,

innovation, sales, and the biological sciences. He heads the intellectualproperty consulting effort at Landon IP, Inc., one of the largest privatelyheld patent search, analysis, and consulting firms in the United States.Robert holds a BA in Biology and Military Science from Duke Univer-sity and an MBA from Edinburgh Business School, UK. He served asan infantry officer for the 101st Airborne Division of the United StatesArmy. Robert has an extensive business development background thatincludes employment at IBM/ROLM, Dean Witter, Derwent Infor-mation, and Manning & Napier. Robert is currently a member of theIntellectual Property Owners association and the Licensing ExecutiveSociety. He is a previous member of the Society of Competitive Intel-ligence Professionals, and spent two years on the board of the UnitedProfessional Sales Association. Robert lives in Alexandria Virginia. Hisfavorite hobby is shark photography.

xxiii


Orientation

P atents are a key driver of business growth for companies that relyon research and development to create the products and servicesthey sell. They provide an incentive to innovate by affording the

means to secure and advance inventions in contested technological fields.As such, they are at the center of a discussion on business strategy thatwill follow. Before we begin with this discussion, however, there area few things you should know about patents. Even if you are alreadyfamiliar with patents, your review of this material will help to align ourorientation on the subject.

The Grant

To start, you should know that a patent is the grant of the right toexclude others from making, using, or selling the claimed inventionfor the life of the patent within the jurisdiction of the granting patentoffice. A granted patent is most often sought by people applying for apatent either because they plan to enforce the exclusivity of their claimedinvention or because they want to maintain their freedom of operation

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by preventing a competitor from obtaining a patent on that same inven-tion first. For the latter, simply applying for the patent can prevent acompetitor from obtaining a similar patent by establishing that inven-tion in the public domain as prior art (an already existing invention).In order to make the former purpose useful, the patent owner needs tobe willing to enforce this granted right to exclusivity, or present to theworld of potential infringers a credible expectation that patent enforce-ment will occur if they do not otherwise establish suitable arrangementswith that owner. Having the patent itself, and the willingness to enforcethe right to exclusivity it grants, however, does not guarantee that itsowner will actually succeed when enforcing that right, or even have thecapacity to enforce that right if challenged by an infringer of the patent’sclaims.

At any time during the life of a patent, a second party may, byaccident or design, infringe on the claims covered by the patent. Theterm “infringe” means that another party has made, used, or sold aninvention claimed within the patent in violation of the patent owner’srights. This infringement in itself is a matter on which two parties maydisagree, provided that the patent owner even discovers the infringement.A disagreement can arise about whether the invention of the allegedinfringer actually infringes on the patent claims or whether the patentowner should have the rights to the patent claims as granted.

Since the claims of a patent are open to interpretation, ultimatelyby a court of law, the granted patent really offers its owner only a rightto exclude, based on the presumption that the claims of that patent canbe enforced. Furthermore, both the owner of the patent and potentialinfringers may assess the probability of successful enforcement on thepart of the patent owner differently. That difference in assessment is oneof the factors that leads to patent disputes, because it necessarily meansthat the relative value of the predicted outcome of a patent challenge foreach party will not be the same. If both parties view their chances ofwinning as high, regardless of the ultimate truth of the matter, the riskof conflict is correspondingly higher than it might be if opposing sideshad more accurate views of their relative positions.

The actual value associated with the probability of successful patentenforcement to two or more involved parties will generally be reconciledmonetarily at the time of a transaction, settlement, or court judgment


Orientation xxvii

involving the patent. At any other time in a patent’s life, its present valueis based on the probability that it can successfully be enforced, and thatwill further vary considerably depending on the capacity of owners orlicensors to enforce the patent and commercially exploit the inventionit describes. Whether this probability is closer or further away from thevalue desired at the time of a transaction, settlement, or court verdict mayvery well depend on the relative skills of the negotiating teams involved.The patent owner will also receive value indirectly from any infringe-ments on inventions that did not occur because a potential infringerrespected the patent claims and the patent owner did not actually haveto enforce them or even know about the threat. The sum value of thepatent will further depend on the following:

� The quality and coverage of the patent itself� The quality and coverage of other patents and associated intellectual

property within the patent’s sphere of influence� The quality of the legal counsel charged to enforce the patent� The way the patented invention is used in the market� The resources available and employed to support any enforcement

effort� The quality of all aspects of the opposition� The particular court (and jury, if any)� The enforceability of patent laws within the jurisdiction covered by

the patent

In short, anyone involved with patents has a lot of variables to con-sider and uncertainties to address to make those patents both valuableand useful.

With all variables and uncertainties considered, the stakes in anychallenges to a patent’s claims are often high, and the process to enforcethem is often both expensive and risky. Enforcement is also not a one-sided matter, since a given patent owner may have the same propensityto challenge the claims of a competitor’s patents as that competitor mayhave to challenge the claims of that patent owner’s patents. In fact, themeasure of a patent owner’s capacity to both challenge and defend patentsis often the key determinant in whether that patent owner can maximizethe value of patents in the market and mitigate or avoid the harmful effectsof patent disputes.


xxviii o r i e n t a t i o n

Because patent enforcement is both expensive and risky, you, assomeone involved with patent strategy, will generally prefer strategiesthat encourage competitors to respect your patent claims without actu-ally challenging them, since that means you can focus your efforts onadvancing the business and not on patent litigation. An exception tothis tendency is found within a few businesses or departments of busi-nesses designed and funded specifically to challenge patents. With themajority in mind first, the reason that enforcing patents is both expensiveand risky and generally a distraction is that the process can play out asa business equivalent of war, albeit and fortunately fought with moneyand careers instead of actual lives. Wars are often expensive, even for thewinners. That patent disputes can play out as the business equivalent ofwar relates to the fact that the practice of law itself, of which patents area part, has its origins in history as a means to resolve disputes by somemethod other than the sword. But that enforcement is often only onestep removed from more physical and often even more costly means ofcreating a resolution.

Patent law, like law in general, exists to create order in the affairs ofpeople and organizations covered by those laws so that people complywith rules they might otherwise ignore in the absence of potential conse-quences for breaking those laws. These consequences can be significantin that they may decide the flow of millions to billions of dollars. Anyorganization that might deliberately or accidently infringe on another’spatent claims or that might decide whether to undertake the enforce-ment of a patent’s claims, needs to be concerned about all manner ofpotential consequences in order to balance the risk of infringement andenforcement with the potential reward. These consequences also shouldbe weighed against any imbalances of risk that may occur between theinvolved parties. Regardless of whether you are challenging or defend-ing a patent position, you will generally prefer to bear less risk than youropponent.

Patents, as legal documents, provide a tool to establish some orderregarding the ownership and use of inventions that the owner would liketo see enforced, namely to prevent the unauthorized making, use, or saleof the inventions described within a patent’s claims by parties that havenot properly obtained the right to make, use, or sell those inventions.The owner of an invention invests in patents specifically because patents

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