Comment: Tech firms harnessing the power of intellectual property
Haydn Evans, Vice President of Intellectual Property Outsourcing, CPA Global, argues that patent research is the key to building a robust IP portfolio.
The recent flurry of patent sales and acquisitions in the electronics sector illustrates dramatic changes in the way some of the biggest technology companies are approaching their intellectual property (IP). It also underlines increasing industry recognition of the importance both of developing a robust IP portfolio and properly managing those intellectual assets – and that all starts with effective patent research.
The initial catalyst for these changes came about eight years ago when a number of larger tech companies with, at that time, relatively small patent portfolios found they were increasingly being sued for patent infringement. This increase in litigious activity was largely due to the emergence of a new kind of patent owner, the non-practising entity (NPE), so named because, rather than securing patents for the right to develop and/or commercialise an invention, they obtain rights purely for offensive purposes.
Microsoft and Apple are examples of companies that came under attack, and they and numerous other companies responded by investing in their IP departments, increasing their patent filings, and head-hunting the best IP personnel. At the same time, some of these companies started making relatively small scale purchases of third-party patents to complement their growing IP portfolios.
Stepping up another gear
In the past two years – largely as a result of the smart phone technology wars – interest in patents has stepped up another gear, with some headline grabbing developments, including:
• The bankruptcy of Nortel Networks, which led to the $4.5 billion sale of their coveted patent portfolio
• Google’s $12.5 billion purchase of Motorola Mobility – largely attributed to the acquisition of the latter’s attractive patent portfolio
• The divestiture of large parts of Nokia’s prized patent portfolio – including the sale of 500 patents to app maker Vringo for a reported $22 million
• The auction of Kodak’s 1,100 digital imaging patents
The net effect of all this activity is that, across the board, companies in the electronics industry have realised that, whether bought or home-grown, a strong patent portfolio is not only necessary for protection, but can also be a vital component in developing a true competitive edge.
What’s also increasingly apparent is that, in order to grow and maintain a strong patent portfolio in an increasingly competitive and litigious market, the ability to undertake and analyse high quality patent research is paramount.
It provides companies with a clearer picture of the IP landscape relating to specific technologies, thereby helping identify opportunities to develop new innovations – either on their own or in partnership with other patent holders – as well as possible infringement risks. In this way, effective patent research can support corporate decision-making on such issues as investment in R&D, industry collaboration, and M&A activity.
Quality patent research benefits companies by:
• Highlighting their best inventions for patent filing
• Drafting strong patent claims, taking into account relevant patents that have already being published
• Identifying third-party inventions that could be purchased or licensed to complement their existing patent portfolio
• Understanding and monitoring the patent and R&D activity of their competitors
• Protecting product revenue by avoiding future patent litigation
• Reducing their exposure to damages from infringement claims through validity searches on the patents in question
• Demonstrating to potential investors that the company’s valuable intellectual assets are differentiated and that the related technology can be defended
Improving returns on investment
Many organisations are now also recognising that there are significant opportunities to generate improved returns on investment by incorporating patent research into their patent lifecycle processes. For instance, a technology company that regularly conducts searches prior to filing patent applications may be able to exclude a significant percentage of its planned filings on the basis that the applications in question are not “novel”.
This, in turn, will result in savings in drafting, filing and prosecution costs. For a large organisation with 1,000+ filings, such savings can run into millions of pounds.
In a recent interview, Curtis Rose, Hewlett-Packard’s top patent attorney, spoke of the company’s drive for quality over quantity in its patent applications – and how routinely conducting patentability searches before filing patent applications “offers HP a strategic advantage” in addition to the benefits he believes it holds for the patent system in general.
Rose, Vice President and Assistant General Counsel at HP, explained: “From a financial perspective, the worst-case scenario [if we don't run these kinds of searches] is that the application will go all the way through the system, and even to grant, before we discover that the patent isn’t truly valid. It’s much better to find that out early on in the process, before you’ve spent so much money. Even if we find that 5% of identified innovations are rejected during this process, it more than pays for the cost of the patentability search. We’re selective about the number of patents that we file, so we don’t want to waste applications on inventions that aren’t patentable.”
In search of freedom
The rising threat of litigation, particularly prevalent in the smart phone sector – note the ongoing litigation between Apple and Samsung – means that it’s more critical than ever for IP departments to ensure that their companies’ products and technologies do not infringe third-party patents. To help cope with these challenges, it’s important that companies put in place an effective, well structured Freedom To Operate (FTO) patent research process.
Implementing a thorough FTO process is not cheap or, for that matter, easy; however, the set up and ongoing costs can be a tiny fraction of potential patent infringement losses, which can be hundreds of millions or even billions of pounds.
Unfortunately, some companies do not implement such safeguards until they’ve been on the wrong side of a patent infringement judgment!
Haydn Evans, Vice President of Intellectual Property Outsourcing, CPA Global, manages CPA Global’s IP outsourcing services. This includes all IP searching, technology landscaping and patent portfolio optimisation services for a range of multinational customers and smaller technology organisations. Previously, Haydn was a Senior Analyst and Strategy Manager for GE Healthcare, where he worked in areas such as diagnostics, medical imaging and bioscience technology.