The world has seen a startling increase in new technology in the past couple of decades. Inventions that would have been considered science fiction 20 years ago have drastically changed the way we function in almost every aspect of our daily lives. The filing of new patents across the globe has also advanced to an unprecedented number. In 2016 the number of new patents filed worldwide increased by 7.8% over comparable figures in 2015, according to figures provided by the World Intellectual Property Organization.
Increasing Pressure on Patenting Budgets
In the midst of these remarkable technological advances, we are simultaneously enduring one of the most tumultuous global economies seen in several decades. Practically all industries have been adversely affected one way or another, which has required companies to take a closer look at how they spend money, and either make processes more efficient or initiate cost-saving cuts where appropriate.
At the same time, companies are pressured to continue to innovate. Georgetown Law’s “2016 Report on the State of the Legal Market” reported that failure to innovate has caused many well-established companies to be blindsided by technological developments that oust them from their market leadership positions. Consequently, company IP leaders have been asked to protect innovations while simultaneously facing budget cuts that make their job difficult at best, and impossible at worst.
Patents are especially subject to budget pressures because they are intangible and commonly the most expensive intellectual property to acquire and maintain, especially for companies filing patent applications in non-U.S. jurisdictions.
What Can Be Done
The considerable expense associated with patent procurement compels companies to seek alternative ways of mitigating patent expenses. Some common ways companies attempt to mitigate patent expenses include:
- Squeezing application preparation and prosecution pricing (both foreign and domestic).
- Forgoing foreign (and sometimes domestic) patent protection on otherwise valuable innovations.
- Filing patent applications in fewer foreign jurisdictions.
- Outsourcing original patent application drafting tasks to foreign countries, oftentimes in contravention to U.S. Export Administration regulations. For more information, see Federal Register Vol. 73, No. 142.
By employing such strategies, companies metaphorically take a hatchet to their patent budget without considering the deleterious effect on the resulting patent assets. While saving money in the short term, such hatchet-type strategies can lead to poorer asset quality, which further diminishes the company’s ability to use patent assets to drive corporate opportunities.
Successful companies will approach patent spend management differently. Instead of using a hatchet approach, companies would do well to employ a scalpel that strategically and intelligently incorporates cost savings.
Part of an intelligent scalpel approach includes aligning patent and corporate strategies such that they mutually reinforce and support one another. To accomplish this, companies must embrace and utilize data-based objective analyses to align business goals with filing strategies and portfolio management decisions. This has the effect of optimizing the value of the patents procured while at the same time minimizing the costs involved. Companies should also integrate strategic business goal alignment algorithms, comprehensive competitor analytics, and patent strength analytics to build and justify a successful patenting strategy.
A successful company patent strategy should:
- Protect market potential and growth of the technology, including current and future research and development, product pipelines, and commercial efforts.
- Be based on filing, examination and maintenance strategies that capitalize on early indicators of patentability, jurisdictional realities, and company objectives.
- Address how patent assets can be leveraged through collaboration, external innovation, corporate opportunities, product exclusivity, and other monetization methods.
- Elevate the innovative culture of the company while simultaneously elevating the reputation of the company in the industry.
- Create blocks where competitors have (or will likely have) a footprint.
- Strategically abandon patents when business activities are no longer aligned with jurisdictional realities.
By approaching patenting in a smarter way, it is possible to lower costs of managing patent portfolios while simultaneously strengthening a company’s patent position. Successful companies will embrace the ongoing innovation paradigm shift by thinking smarter to continue to build corporate patent assets that can be leveraged to drive innovation, collaboration and monetization opportunities. Doing so can potentially transform company patent departments into corporate asset centers, which provide benefits through leverage.
Carey Jordan and D. Jeremy Harrison are both partners in the Houston office of Vorys, Sater, Seymour and Pease. Jordan is a patent veteran with nearly two decades of experience handling patent prosecution matters, patent challenges, litigation and intellectual property counseling. Harrison has also focused his practice on intellectual property matters for the past 10 years.