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


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


The Good, The Bad and the Ugly of Creating Value from IP


THE GOOD: PATENT & IP BASICS


Patent vs. Intellectual Property

Patent

Trademark

“Intangible assets”

Trade secret

Copyright Intellectual

Property


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


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


US Utility Patent Data

PatentlyO.com Copyright: The Lean Legal Team 2013

Top Patent Filers 2012


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


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


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


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


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


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


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


ALTERNATIVES TO PATENTS


The IP Toolbox


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”


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


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


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”


THE BAD: PATENT REALITY CHECK


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


Complete this sentence

• When all you have is a hammer, everything looks like a _________.


For Patent LawyersPatents are Business


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


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


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


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


• 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


• 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




• 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


• 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 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


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”


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


THE UGLY:PATENT STRATEGY CASE STUDY


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


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!


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


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


QUESTIONS?

[email protected]


the basics of intellectual property and patent strategy for maximizing business value: the good,...

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