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The Hidden Gems Are In Second Layer Patents

In a previous post, I laid out my three layers of patents. The first layer covers the fundamental mechanics of a business’s technology. The third layer covers broad applications of the technology, and the second layer covers the tools that bridge the gap.

Let’s look at a hypothetical example with the benefit of hindsight. Assume that we have developed a read/write memory device that does not require constant refresh: flash memory. We could patent the basic features of the memory device, including the mechanical description, material composition of the components, connections, and basic operation sequence. These are the Layer 1 patents.

At its inception, flash memory was very expensive. However, the applications for flash memory are huge. For example, the USB dongle-type disk drives could have been envisioned at that time, and would be an example of a good Layer 3 patent.

Because flash memory was very expensive at its inception, several new technologies needed to be developed before the Layer 3 applications would be commercially viable. These developments and innovations could form the Layer 2 portfolio of patents.

Many problems are solved on the way of bringing Layer 1 fundamental technologies to Layer 3 applications. For example, if a specific manufacturing process needs to be radically changed and improved or a new type of processing sensor may be created to monitor the manufacturing process, it may be grist for the Layer 2 patent mill.

Because the company has a single focus on flash memory, they may not realize how useful some of the Layer 2 ideas could be to other technologies. For example, a dramatically improved manufacturing process developed by a flash memory team may directly benefit manufacturers of VLSI, FPGA, or microprocessor chips. Similarly, the sensor developed to monitor a manufacturing stage may be useful in automotive or aerospace applications.

From a business standpoint, the Layer 1 and Layer 3 patents are useful for protecting their product development and marketing investment by keeping flash memory competitors at bay. The Layer 2 patents, however, are excellent candidates for licensing to companies with similar, but not competing, technologies. In some cases, the Layer 2 technologies may have even broader applicability.

In many cases, solving of the day-to-day technology implementation problems lead to Layer 2 patents which can be more valuable than either the Layer 1 or Layer 3 patents. This is because the Layer 2 patents may span many more industries and products than the patent holder’s company.

It is impossible to predict exactly how a technology will develop. By protecting the technology in several stages, a business manager may keep many options open for the future, such as developing the core technology of a company and building a royalty revenue stream from licensing technology to non-competitors.