Strategies for Successful Patent Procurement

To develop competitive business advantages, one must develop sound strategies for successful patent procurement. Patent procurement includes not only filing patent applications for a company’s own R&D efforts, but also procuring strategic patents from third parties to support or supplement its own business.

I. Understand Your Business Goals

A major aspect of successful patent procurement is to decide what to patent. To do so, you must understand your business goals and integrate them into your IP strategies.

First, not all your innovations are suitable for patenting. For example, a patent provides your right to exclude others from practicing your invention, but in exchange, your must disclose sufficient information to enable others to appreciate your invention. Therefore, if it is difficult to detect infringing activities, you may choose to protect the innovation as trade secrets. In contrast, if your invention may be easily copied through reverse engineering, you may consider patenting your invention before start selling any products embodying the invention. However, if you choose to protect your invention as trade secrets, you must develop and enforce policies managing trade secrets and preventing technology leakage.

Second, understand why you decide to patent. Obviously, it depends on your business model. If you are a design house and do not make any products, IP is your life line and you must patent to protect your revenue (e.g., royalties from licensing). However, if you are a manufacturer of chips or semiconductor equipment, chances are that you have many direct competitors. What is your strategy, then, for gaining competitive advantages through your IP?

For example, Tokyo Electron Limited (“TEL”), a successfully semiconductor equipment company, uses patents to differentiate its own products and bolster its competitive advantages. [1]

Conversely, a company may choose to patent potential common desirable features of the next generation products to gain competitive advantages. If successful, the company may force its competitors to design around at a higher cost or even drive its competitors out of business.

Therefore, different companies should develop strategies to suit their own business goals. There is no one strategy that fits all. In general, however, understanding your business goals requires you to understand your competitors’ business and develop a decision-making process to patent your innovations that will advance your business goals.

II. Procure Patents to Achieve Your Goals

Once you understand your business goals and understand why you patent, you can then procure strategic patents to achieve your goals.

First, identify technology roadmaps. Certainly, patent mapping will provide some insights as to what areas your competitors already obtained patents in and what areas you may choose to focus your patenting efforts on. Additionally, working closely with your customers and suppliers will help you identify common goals, develop timely solutions, and patent the solutions for your competitive advantages. For example, TEL’s patent strategies include working closely with chip manufacturers, material suppliers, and other equipment suppliers to pursue common goals and provide timely solutions. [2]

Second, provide incentives to inventors to encourage new ideas. Successful companies utilizes one or more incentives, including (1) lump-sum payments at the time of submission of patent applications, (2) bonuses if inventions are commercialized in-house or licensed to third parties, and (3) awards to honor inventors.

Third, acquire patents via multiple avenues. For example, TEL procures patents through (1) global R&D effort with facilities in Japan, Europe, and the U.S., (2) collaboration with industry consortia, universities, and research institutes, and (3) TEL Venture Capital, Inc. (based in California) to discover, assess, and utilize promising technologies on a global scale. [3]

III. Think Outside the Box

Patent procurement is not limited to patenting your own technologies. Successful companies frequently purchase patents from third parties to protect their products and gain competitive advantages.

How about purchase patents unrelated to your products? This may sound like a crazy idea, but thinking outside the box can pay off in the long run.

One of the most anticipated cases in 2008 is the Quanta v. LG case where the U.S. Supreme Court ruled on patent exhaustion issues involving LG’s patents related to computer chips and memories. [4] This case has been discussed extensively by many commentators, so this article will not discuss the details of this case. One fact of this case, however, was often overlooked, as people rarely noticed that LG’s patents-in-suit were originally patented by Wang Laboratories. The USPTO assignment record shows that LG purchased many of Wang Laboratories’ patents related to computer chips and memories in the 1990s after Wang Laboratories filed for bankruptcy.

Why did LG purchase these patents, as LG does not appear to make computer chips and memories? One obvious reason is that LG profited at least hundreds of millions dollars from these patents through royalties from computer makers such as Quanta.
Another subtle reason, however, may lie on LG’s competitive business advantages against its competitors who also make products covered by these Wang patents. Some commentators have observed that LG might have used these patents to achieve business leverages regarding LG products unrelated to Wang patents, when a competitor has strong patents covering LG products, but happens to also make and sell computer products covered by Wang patents. This way, LG might have used these patents as a deterrent to fend off some competitors’ patent infringement lawsuits against LG’s products.

Therefore, developing sound strategies for successful patent procurement may require companies to think outside the box. Finally, execution of these strategies demands the commitment from the top management and the investment for the future.

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[1] Tokyo Electron Limited, Annual Report 2006, at 21.
[2] Id.
[3] Id.
[4] Quanta Computer, Inc. v. LG Elec., Inc., No. 06-937, slip op. (S.Ct. June 9, 2008).