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

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

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

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

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

The Good, The Bad and the Ugly of
Creating Value from IP


THE GOOD:
PATENT & IP BASICS


Patent vs. Intellectual Property
Patent

Copyright

Trade
secret

Trademark

“Intangible
assets”


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

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

US Utility Patent Data

PatentlyO.com


Top Patent Filers 2012


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

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


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


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
in US

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

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

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
are both blocked

ALTERNATIVES TO PATENTS


The IP Toolbox


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


“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

“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
• Many others!

“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”

THE BAD:
PATENT REALITY CHECK


Who Makes Money from Patents?
% Probability that $ Obtained

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

USPTO

Entrepreneur


Complete this sentence

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


For Patent Lawyers
Patents are Business

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

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

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

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

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”

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

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


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


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

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


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

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


THE UGLY:
PATENT STRATEGY CASE STUDY


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


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


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
roadmap?

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 Procurement is Legal Strategy
• How IP obtained depends on legal issues
• Proceed only if will allow successful
execution of business strategy

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!

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

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

QUESTIONS?

JHutter@LeanLegalTeam.co
m


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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