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IP: The Good the Bad and the UglyHow to Create Value So You End Up
with a Fistful of Dollars

Jackie Hutter, MS, JD
JHutte...
Take Aways from Today’s Conversation
Overview of the Types of IP
• Not just patents but a “whole toolkit”

Demonstrate tha...
My Perspective
• Almost 20 years as IP professional
– Law firm
• Prosecution and counseling
• Litigation

– Corporation
• ...
IP Strategists?
•New breed of business
counselor who aligns client’s
commercial strategy with IP
protection
▫Beware lawyer...
The Good, The Bad and the Ugly of
Creating Value from IP

Copyright: The Lean Legal Team 2013
THE GOOD:
PATENT & IP BASICS

Copyright: The Lean Legal Team 2013
Patent vs. Intellectual Property
Patent

Copyright

Trade
secret

Trademark

“Intangible
assets”

Copyright: The Lean Lega...
Patent Types
1. Utility Patent:
patents on inventions which function in a new way or to
provide a new result
2. Design Pat...
What Is a Utility Patent?
• Exclusive rights granted by a
government to anyone who
invents or discovers any new
and useful...
US Utility Patent Data

PatentlyO.com

Copyright: The Lean Legal Team 2013
Top Patent Filers 2012

Copyright: The Lean Legal Team 2013
Where Can You Obtain a
Patent?
National
Patent Office

WIPO

• USPTO
• State Intellectual Property Office of
China
• Japan...
U.S. Utility Patent Applications
provisional
application

non-provisional
application

Allow filling
without any formal
pa...
Utility Patent Application Process
Invention Identified
and Vetted for Filing
Expense

Application Drafted
and Filed by At...
Patent Features
Exclusivity
• One patent per invention
• Without patent holder
permission no one can make,
market, use, im...
Patent Business Basics
What Patents Are (and Aren’t)
• Given by government for
useful, new and unobvious
inventions
• Reco...
Patent Business Basics
Patents as a Property Right
• Not a monopoly
• A right to exclude
– Broader
• Can use
• Not use
• K...
Patent Business Basics
What are Patent Owners Rights?
• Improvements
existing patented
inventions also
patentable
• “Impro...
ALTERNATIVES TO PATENTS

Copyright: The Lean Legal Team 2013
The IP Toolbox

Copyright: The Lean Legal Team 2013
Other Ways to Protect Business Ideas
“The Regulars”
• Trade secret protection
– Good when idea cannot be
reversed engineer...
Other Ways to Protect Business Ideas
“The Regulars”

• Copyright protection
– Good for software /logos
– Statutory damages...
Other Ways to Protect Business Ideas
“Not So Regulars”
• Ride on coat-tails of another
patent
– Strategic alliances, joint...
Other Ways to Protect Business Ideas
“Not So Regulars”
• First Mover Advantage
– Sometimes first to market ends
up effecti...
THE BAD:
PATENT REALITY CHECK

Copyright: The Lean Legal Team 2013
Who Makes Money from Patents?
% Probability that $ Obtained

100
90
80
70
60
50
40
30
20
10
0
Patent Lawyer

USPTO

Entrep...
Complete this sentence

• When all you have is a
hammer, everything looks like a
_________.

Copyright: The Lean Legal Tea...
For Patent Lawyers
Patents are Business
Copyright: The Lean Legal Team 2013
Do You Really Know What a
Patent is Good For?
• Many assume patent are
necessary step for
business
– Could be waste of
res...
Patent Business Basics
Most Patents Worth Little
• Very few patents
worth what people
think they are
– Cover invention tha...
Patents: Not What People Think They Are
• Does not guarantee invention is
valuable
– Government recognition that idea
meet...
What You Need to Know Before Filing
• Contract with government
– Patentee discloses trade secrets
in exchange for limited ...
What You Need to Know Before
Filing
• Must be filed within 1 year of 1st
public use or sale
– Some flexibility
– Timing re...
What You Must Know Before
Filing
• Costly
– Minimum of $10K for simplest
technology
– $20K or more of moderately
complex c...
What You Must Know Before
Filing
• Systemic problems in Patent
Office enhance difficulties
– Even the most carefully
draft...
What You Must Know Before Filing
• When are Patents Worth
$$?
• When a current or future
viable business model is
covered ...
What You Must Know Before
Filing
• But, even if viable
business model and
patentable, there are
times when don’t want
pate...
What You Need to Know Before Filing
• For patent attorneys risk arises
when clients wait to file
– “File early and often”
...
Patent Business Basics: Patents as Currency
• Patents have
transactional value when
cover business model and
marketplace e...
Key Takeaways
• To determine whether you
need to generate your own
patents or acquire from
outside
– 1) Identify business ...
THE UGLY:
PATENT STRATEGY CASE STUDY

Copyright: The Lean Legal Team 2013
Case Study: Invention vs. Innovation
• Invention: 1st viable
“hands free” dispenser
• Innovation: Hygienic way
to dry hand...
Case Study: Invention vs. Innovation
• What kind of
claims should GP
have sought?
• What was
innovation?
• Why do customer...
Innovation vs. Invention
• For platform
products, patent
coverage must be
innovation focused
– Problem not just solution
•...
Final Thoughts
How to End Up with A Fist Full of
Dollars
Getting Your IP Right
IP Strategy is Business Strategy
• Why you are protecting IP depends on
your business plans

IP Proc...
Getting Your IP Right
Business leaders need to learn enough
about IP process to be able to align
business goals with IP ef...
Identifying Intangible Asset Value
• 1. What makes YOUR business
different from its competitors?
– What is your unique com...
Possible Sources Competitive Advantage
Patentab
le
Invention
s
Others
Specific
to
Business
Model

Your
Busines
s’
Intangib...
QUESTIONS?

JHutter@LeanLegalTeam.co
m

Copyright: The Lean Legal Team 2013
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The Basics of Intellectual Property and Patent Strategy for Maximizing Business Value: The Good, the Bad and the Ugly So You Can Make a Fistful of Dollars

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This IP Strategy Overview was presented at a conference of innovators at Georgia Tech's College of Architecture in October 2013. The goal of this presentation is to go beyond the usual lawyer-generated content to highlight not only the positive aspects of IP, but also to give a reality check as to the likely ROI of investment in protection. A basic overview of IP (patents, copyrights, trademarks, trade secrets) is provided. Additionally, commonly overlooked forms of intangible asset value are presented. A case study of an innovation protection strategy is highlighted. Recommendations for business relevant IP and patent protection strategies are also included.

Published in: Business

The Basics of Intellectual Property and Patent Strategy for Maximizing Business Value: The Good, the Bad and the Ugly So You Can Make a Fistful of Dollars

  1. 1. IP: The Good the Bad and the UglyHow to Create Value So You End Up with a Fistful of Dollars Jackie Hutter, MS, JD JHutter@LeanLegalTeam.com
  2. 2. Take Aways from Today’s Conversation Overview of the Types of IP • Not just patents but a “whole toolkit” Demonstrate that patenting is a business issue not a legal or technical issue • New model for creating long term business value Introduce concept of patenting innovation vs. invention • Key to durable competitive advantage Copyright: The Lean Legal Team 2013
  3. 3. My Perspective • Almost 20 years as IP professional – Law firm • Prosecution and counseling • Litigation – Corporation • Legal and innovation counsel • Last 6 years as “IP Strategist” – Put business issues before legal issues – “Validate your business, not just mine” – Truth telling, not risk mitigation • Research scientist/inventor – Insights from the trenches Copyright: The Lean Legal Team 2013
  4. 4. IP Strategists? •New breed of business counselor who aligns client’s commercial strategy with IP protection ▫Beware lawyers who “do strategy” •IP and business expertise •Driving principle: “IP is worthless if it does not support a viable business strategy” • Frequently in-house lawyer, but not always •Many not attorneys Copyright: The Lean Legal Team 2013
  5. 5. The Good, The Bad and the Ugly of Creating Value from IP Copyright: The Lean Legal Team 2013
  6. 6. THE GOOD: PATENT & IP BASICS Copyright: The Lean Legal Team 2013
  7. 7. Patent vs. Intellectual Property Patent Copyright Trade secret Trademark “Intangible assets” Copyright: The Lean Legal Team 2013
  8. 8. Patent Types 1. Utility Patent: patents on inventions which function in a new way or to provide a new result 2. Design Patent: patents on the aesthetic design or ornamentation of something that already exists; no change for functionality of the object, only gives it a novel appearance 3. Plant Patent: patents on types of plants that may be reproduced by grafts and cuttings Copyright: The Lean Legal Team 2013
  9. 9. What Is a Utility Patent? • Exclusive rights granted by a government to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof • Patent irrelevant to business value, only demonstrates meets legal requirements Copyright: The Lean Legal Team 2013
  10. 10. US Utility Patent Data PatentlyO.com Copyright: The Lean Legal Team 2013
  11. 11. Top Patent Filers 2012 Copyright: The Lean Legal Team 2013
  12. 12. Where Can You Obtain a Patent? National Patent Office WIPO • USPTO • State Intellectual Property Office of China • Japan Patent Office… • International patent application office • headquartered in Geneva, Switzerland • Still must apply nationally Copyright: The Lean Legal Team 2013
  13. 13. U.S. Utility Patent Applications provisional application non-provisional application Allow filling without any formal patent claims, oath or declaration or any information disclosure statement Less costly No real protection “Saves place in line” Contains at least a specification, all the drawing figures and at least one claim. Goes through examination Can be filed multiple times Copyright: The Lean Legal Team 2013
  14. 14. Utility Patent Application Process Invention Identified and Vetted for Filing Expense Application Drafted and Filed by Attorney $5,000-$50,000 Application Published 18 months Final Rejection Response by Attorney Amendment of Claims $3000-$10,000 Office Action 12-36 months Allowance $1500 Maintenance Fees 3.5, 7.0, 11.5 Years $900, $2300, $3800 Copyright: The Lean Legal Team 2013
  15. 15. Patent Features Exclusivity • One patent per invention • Without patent holder permission no one can make, market, use, import, etc the patented invention – Otherwise, regarded as patent infringement Territory • Patent limited to certain country • No effect on other country Time • Term of a patent is limited • 20 years from earliest filing date Copyright: The Lean Legal Team 2013 in US
  16. 16. Patent Business Basics What Patents Are (and Aren’t) • Given by government for useful, new and unobvious inventions • Recognition that invention meets the legal requirements for patentability – Checklist of statutory obligations for both invention and way patent is written • Only market determines business value of invention Copyright: The Lean Legal Team 2013
  17. 17. Patent Business Basics Patents as a Property Right • Not a monopoly • A right to exclude – Broader • Can use • Not use • Keep others from doing what they would otherwise be free to do • No right to practice the invention claimed – Inventor can be blocked by other’s patent rights Copyright: The Lean Legal Team 2013
  18. 18. Patent Business Basics What are Patent Owners Rights? • Improvements existing patented inventions also patentable • “Improvement” patents • If best way to practice underlying invention, can stop first inventor • Someone else can improve on your patented invention and stop you so you Copyright: The Lean Legal Team 2013 are both blocked
  19. 19. ALTERNATIVES TO PATENTS Copyright: The Lean Legal Team 2013
  20. 20. The IP Toolbox Copyright: The Lean Legal Team 2013
  21. 21. Other Ways to Protect Business Ideas “The Regulars” • Trade secret protection – Good when idea cannot be reversed engineered • Coke® formula, customer lists – Can be licensed or sold, but harder because often not wellrecorded • Trademark protection – For some business ideas, strong trademark protection more valuable than patent rights Copyright: The Lean Legal Team 2013
  22. 22. Other Ways to Protect Business Ideas “The Regulars” • Copyright protection – Good for software /logos – Statutory damages of at least $100K available if register prior to bringing suit • Design patent protection – Protects ornamental aspects of invention – Can exist with utility protection – Recent case law make stronger • But not as strong as utility patents – Inexpensive and quick • < $2K and typically 1.5 years or Copyright: The Lean Legal Team 2013
  23. 23. Other Ways to Protect Business Ideas “Not So Regulars” • Ride on coat-tails of another patent – Strategic alliances, joint ventures • Ex: If supplier has patent to raw material and you obtain exclusive rights to use , can be almost the same as obtaining own patent • Commercial relationships – Contractual-based market exclusivity Copyright: The Lean Legal Team 2013 • Many others!
  24. 24. Other Ways to Protect Business Ideas “Not So Regulars” • First Mover Advantage – Sometimes first to market ends up effectively owning the relevant market, especially when • Limited distribution opportunities; • Short shelf life; or • Only enough customers for 1 supplier • Customer Traction – “Traction is the new IP” Copyright: The Lean Legal Team 2013
  25. 25. THE BAD: PATENT REALITY CHECK Copyright: The Lean Legal Team 2013
  26. 26. Who Makes Money from Patents? % Probability that $ Obtained 100 90 80 70 60 50 40 30 20 10 0 Patent Lawyer USPTO Entrepreneur Copyright: The Lean Legal Team 2013
  27. 27. Complete this sentence • When all you have is a hammer, everything looks like a _________. Copyright: The Lean Legal Team 2013
  28. 28. For Patent Lawyers Patents are Business Copyright: The Lean Legal Team 2013
  29. 29. Do You Really Know What a Patent is Good For? • Many assume patent are necessary step for business – Could be waste of resources • Money and time • Many assume that not necessary to create business value – Often wrong • Lose exclusivity in successful business model Copyright: The Lean Legal Team 2013
  30. 30. Patent Business Basics Most Patents Worth Little • Very few patents worth what people think they are – Cover invention that no one will buy • Don’t understand underlying value proposition – Is there IP? Check. – False sense of security Copyright: The Lean Legal Team 2013
  31. 31. Patents: Not What People Think They Are • Does not guarantee invention is valuable – Government recognition that idea meets legal requirements of invention – Free market/business savvy determines actual value • If business value in idea, then patent might be necessary (but not always) – Do we “fetishize” patents? • Most filed before a marketable product – Issued patent often does not cover actual product – Lawyers recommend early filing 2013 Copyright: The Lean Legal Team
  32. 32. What You Need to Know Before Filing • Contract with government – Patentee discloses trade secrets in exchange for limited exclusive rights • Repudiation of trade secret protection – Must “open the kimono” • Patentee obligated to be truthful – Disclose all information known about invention • Relevant times – 3-7 years from filing to issue – Lasts 20 years from date of filing Copyright: The Lean Legal Team 2013
  33. 33. What You Need to Know Before Filing • Must be filed within 1 year of 1st public use or sale – Some flexibility – Timing relates to THE invention • Substantial ability to delay filing if strategic about process • More patents not necessarily better – 1 with commercially broad claims enough • Must “cover the innovation not just the invention” Copyright: The Lean Legal Team 2013
  34. 34. What You Must Know Before Filing • Costly – Minimum of $10K for simplest technology – $20K or more of moderately complex cases – Foreign filing in top line countries can easily end up costing $250K or more • Lengthy – Today average pendency in US is 3 years or more • Significantly longer in foreign countries – No protection until issuance Copyright: The Lean Legal Team – Market often exhausted by time 2013
  35. 35. What You Must Know Before Filing • Systemic problems in Patent Office enhance difficulties – Even the most carefully drafted and skillfully prosecuted may never issue – Costs cannot be recovered if patenting efforts ultimately fail Copyright: The Lean Legal Team 2013
  36. 36. What You Must Know Before Filing • When are Patents Worth $$? • When a current or future viable business model is covered by the claims – Yours – Someone else’s • No business model coverage = $ 0 value Copyright: The Lean Legal Team 2013
  37. 37. What You Must Know Before Filing • But, even if viable business model and patentable, there are times when don’t want patent – Will someone copy? – Do you care? – Can you use defensively against others? – Interest in monetizing? • Key inquiry: What is ROI of patent to total Copyright: The value of opportunity? Lean Legal Team 2013
  38. 38. What You Need to Know Before Filing • For patent attorneys risk arises when clients wait to file – “File early and often” – One type of risk • For entrepreneurs, risk arises for waiting AND for filing before business model validated – Must balance risks Copyright: The Lean Legal Team 2013
  39. 39. Patent Business Basics: Patents as Currency • Patents have transactional value when cover business model and marketplace exists – Relatively few business areas buy and sell today • Technology • Biotech/Health – Others non-existent or still emerging • CPG • Chemicals • “Stuff you drop on Lean Legal Team 2013 Copyright: The
  40. 40. Key Takeaways • To determine whether you need to generate your own patents or acquire from outside – 1) Identify business model (product, service etc.) – 2) Determine whether patents needed to obtain maximum value from this business model or if it is likely that competitors will use patents offensively against you – 3) If yes to #2, generate or acquire – 4) Put business team in charge of execution and make accountable Copyright: The Lean Legal Team 2013
  41. 41. THE UGLY: PATENT STRATEGY CASE STUDY Copyright: The Lean Legal Team 2013
  42. 42. Case Study: Invention vs. Innovation • Invention: 1st viable “hands free” dispenser • Innovation: Hygienic way to dry hands in public place • Invented from scratch – Sensor was key aspect • 25+ patents on invention • Created market demand • Competition reacted by designing around – Now 6+ different options – Price eroded market Photo: GP.com Copyright: The Lean Legal Team 2013
  43. 43. Case Study: Invention vs. Innovation • What kind of claims should GP have sought? • What was innovation? • Why do customers buy? • How would competitors compete? Photo: GP.com Copyright: The Lean Legal Team 2013
  44. 44. Innovation vs. Invention • For platform products, patent coverage must be innovation focused – Problem not just solution • Most patents only latter • Take out of silo of inventor and patent attorney – Traditional viewpoint • Business team and others must be involved in patenting process – How would others would solve consumer problem? – Use your efforts as a Copyright: The Lean Legal Team 2013 roadmap?
  45. 45. Final Thoughts How to End Up with A Fist Full of Dollars
  46. 46. Getting Your IP Right IP Strategy is Business Strategy • Why you are protecting IP depends on your business plans IP Procurement is Legal Strategy • How IP obtained depends on legal issues • Proceed only if will allow successful execution of business strategy Copyright: The Lean Legal Team 2013
  47. 47. Getting Your IP Right Business leaders need to learn enough about IP process to be able to align business goals with IP efforts • Lawyers can guide the process, but must not drive the process IP Strategy (and intangible asset strategy) is critical feature of generating exit value • Just because “they don’t teach it in B-school” doesn’t mean that IP is not the job of business people! Copyright: The Lean Legal Team 2013
  48. 48. Identifying Intangible Asset Value • 1. What makes YOUR business different from its competitors? – What is your unique competitive advantage? • Identify each and every one • 2. Would YOUR business be harmed if this difference was lost to a competitor? – If so, you must capture and protect it so that you can realize it! • Important qualifiers – Copying is legal and appropriate if you don’t protect your competitive advantage – Some things are not protectable, but knowing this is the caseLean Legal Team 2013 Copyright: The allows you
  49. 49. Possible Sources Competitive Advantage Patentab le Invention s Others Specific to Business Model Your Busines s’ Intangibl e Asset Value Employe es Trademar ks Brand Equity Busines s Process es Custome r/ Supplier s Copyright: The Lean Legal Team 2013
  50. 50. QUESTIONS? JHutter@LeanLegalTeam.co m Copyright: The Lean Legal Team 2013

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