After walking the Hardware Show last week and talking to many different people, the conversation often turned to patents and patent strategies when I handed them my business card. I am a sucker for a good inventor-makes-good story, and there were lots of them at the show.
On the whole, I was quite impressed with the basic understanding of almost everybody with regard to patents. Almost everybody understood the basic concept of protecting their intellectual property and the basic business strategies that go along with it.
However, after the basics were covered, many people had some rather fundamental questions, such as misunderstanding a PCT filing, improperly marking their products, and not knowing when and if they should file new patents to cover new ideas.
I had occasion to discuss pricing schemes with another practitioner last week, and I think it is a very interesting topic.
The value delivered by a patent practitioner should, under normal circumstances, far outweighs the costs. If a single invention is generally worth patenting, it should potentially generate hundreds of thousands, if not millions and millions of dollars. This is more true for the small startup company where the largest asset is one or two patents covering the core idea, as opposed to the very large corporations who have portfolios of thousands of patents. The same holds true for independent inventors with ideas that are commercially viable.
Given that an inventor has a potential of reaping millions of dollars from their invention, does the price really matter for the patent?
When a company considers protecting a product, be it a software program, mechanical device, or other product, the strategy must make good business sense. It is certainly possible to spend vast sums of money on large downtown patent firms and file many international patents, then spend virtually endless amounts of money litigating with infringers, but there are other alternatives.
The submarine strategy is a valid business strategy that lets the market for an idea develop before a patent is asserted. This is one of the riskiest strategies, but has the corresponding payoff. There are legal risks as well as business risks, and this strategy tends to have the largest costs as well.
In this strategy, the patentee seeks to cover technology that will become commonplace in the future. Rather than asserting the patent right away, the patentee may keep the patent quiet and let the market develop for the technology. The patentee hopes that the technology will become widely used and a ‘standard’ in the industry. At this point, the patentee may begin asserting the patent against one or more infringers.
One or more patents can be developed for a licensing strategy in conjunction with or separate from a company’s main product.
There are some technologies that are so large that one company may not have the resources to bring the technology to market or where the developing company does not have the interest in fully exploiting the technology.
In this strategy, the patent portfolio is developed with an intent to offer a licensing agreement to one or more other companies, presumably for royalty income.