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The Submarine Strategy

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.

There are severe legal consequences to this strategy. The first is that latches may apply, preventing the enforcement of the patent by the conduct of the patent holder. For example, if the patentee does not assert the patent against an infringer in a timely manner, the patent holder may be barred from enforcing it later.

The second severe consequence is that the infringers have a very large incentive to fight the patent. This translates into a very expensive and protracted legal battle. The patentee must have the financial backing to survive such a suit, or be willing to give up much of his potential windfall as contingency money for an attorney.

In essence, the submarine strategy allows the market to accept and standardize on the patented technology before asserting the patent. At that time, the market inertia and costs to develop a competing technology may be very substantial, which gives tremendous value to the patented technology. As that value increases, the infringers may have much more motivation to settle and pay a reasonable royalty. However, they may also have that much more motivation to fight.