What is IP? Reading Claims. Risks vs. Rewards. U.S. Patents. Patent Strategy. What is an FTO?

1. September 22, 20091
The Changing Role of Patent Strategy
Brad Pedersen
September 22, 2009
What is IP?
Reading Claims
Risks vs. Rewards
U.S. Patents
Patent Strategy
What is an FTO?
Application in
Litigation

2. The Changing Role of
Patent Strategy
Brad Pedersen
Patterson, Thuente, Skaar & Christensen
September 22, 2009

3. What is IP?
Patents
Copyrights
Trademarks/Domain Names
Trade Secrets
September 22, 20093
Gross Profit Margin

4. IP is like GPM Insurance: Use the Right Tool for the Job
September 22, 20094
Patents
Strongest protection
Most expensive and most difficult to
obtain
Copyrights
No protection against independent
development
Easiest and least expensive to obtain
Trademarks/Domain Names
Protection grows based on fame
Trade Secrets
Must be secret
No protection against independent
development

5. Patents as Insurance/Investment: What are you buying?
 Most people look at front of patent
 the abstract
September 22, 20095
 The actual investment is at the back of
the patent
 the claims

6. Reading Claims: What is protected by a claim?
September 22, 20096
A vessel for holding liquid comprising:
a generally cylindrical side wall that
defines an opening at one end with
a bottom wall at an opposite end;
a handle secured to an outer surface
of the side wall
wherein the handle defines an
opening through which at least two
fingers can be inserted.
Claims are like checklists:
for a claim to be patentable, the checklist must
include more than the prior art
for a claim to be infringed, every element and
limitation in the checklist must be present
As an example, lets write a
claim for a coffee cup
The “invention”
The “prior art”

7. Patent Investment Calculus: Risk vs. Reward
Traditional approach
More focused on Reward
Investments based on whether
company can protect its own IP
Then along came …….
“the Recession”
Current approach
More focused on Risk
Investments based on whether
company may be infringing 3rd
party IP
September 22, 20097

8. 3rd Party Patents: What are the risks?
Focus is on US Patent Litigation
Patents provide protection and are enforced on a country-by-country basis
Unlike most countries, US Patent Law provides for enhanced damages for willful
infringement – judges can impose Treble Damages
Actual Factors Increasing Focus
More US Patents being issued
Patent litigation is more complex and costly to defend
Phantom Factors
Relatively same amount of patent litigation (adjusted for total cases)
Relatively same amount of patent damages (adjusted for cost of living)
September 22, 20098

9. US Patents: Patents Granted and Infringement Cases Filed
September 22, 20099

10. September 22, 200910
Litigation Complexity/Expense Have Increased
US Patent Litigation: CPI Adjusted Average Damages

11. September 22, 200911
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
2.00%
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
* Data from Admin Office of US Courts and US Patent Statistic Reports
(Note 1 - values for # of patent lawsuits/appl or patent are not % - i.e., 1.2% = 0.012 lawsuits/appl)
(Note 2 - data for 1980-81 and 1984-87 total Federal cases are interpolated)
Patent Litigation Trends - 1972-2007
Patent Lawsuit as %
of All Fed Lawsuits
# of Patent
Lawsuits/US Patent
Appl Filed
# of Patent
Lawsuits/US Patent
Issued
US Patents: Percentage Trends

12. A good patent strategy is like good insurance coverage
Offensive: Filing patent applications
 How much insurance do you need to protect your products or services
Defensive: Obtaining FTO opinions
 How much insurance do you need against third party patents
One Size Does Not Fit All
What is the GPM?
What is the annual market opportunity?
September 22, 200912

13. The Patent Strategy Matrix
September 22, 200913
Market
Opportunity
$<1M $1M-100M >100M
Patent? No Maybe Yes
FTO? No Maybe Yes

14. What is an FTO?
FTO is more than an invalidity/non-infringement opinion
Opinions are directed to a specific patent
Formal opinions typically cost ranges $5-$25K + patent
FTO is the umbrella that documents the entire review
Details of what is being cleared
Documentation of what patents have been reviewed
Costs depend upon # of features searched and # of patents identified
Challenges in creating a good FTO
Must be simple & efficient
Must demonstrate that company was not recklessly disregarding potentially
relevant patents
Must be able to be integrated with duty of candor requirements in prosecuting
patents
September 22, 200914

15. Patent Database as a Solution
One line/patent with only independent
claims + hyperlink to patent
Simple level ranking
0 – expired
1 – included but apparently not material
2 – facial reading shows non-infringement
3 – requires further evaluation
September 22, 200915
Sorted based on priority
 Enables reviewer to understand
development of art
 Can highlight missed invalidating
prior art

16. Applications in Litigation
A good FTO can now be helpful in defending against willfulness
The “new” In re Seagate standard - August 2007
Overruled the old “Affirmative Duty of Care ” standard
“[P]roof of willful infringement permitting enhanced damages requires at least
a showing of objective recklessness”
“[A] patentee must show by clear and convincing evidence that the infringer
acted despite an objectively high likelihood that its actions constituted
infringement of a valid patent.”
Well documented FTO may defeat charge of recklessness
Even if a given non-infringement or invalidity opinion by counsel ultimately is
held to be incorrect, the FTO process itself evidences the lack of objective
recklessness
June 29, 201816

17. Thank You!
Brad Pedersen | pedersen@ptslaw.com | 612.349.5774
September 22, 200917