Expensive Patent Lesson

A SVP at a significant customer solutions firm not too long ago expressed aggravation that he can’t bring a patent infringement lawsuit even when his firm holds 18 US patents (and quite a few other foreign patents) on a solution that closely resembles a competitor’s solution. His annoyance is compounded since his firm spent quite a few years creating the solution and technologies covered by the patents. His firm also spent quite a few $MM introducing the solution, which turned out to be a failure. The firm removed the solution from the market place soon after quite a few months, but the quite a few patents stay in the portfolio nowadays, and are nevertheless getting maintained at considerable expense. I estimate that the patent protection for this failed solution price as a lot as $500K for patent coverage worldwide.

Considerably, the solution did not fail due to high quality or overall performance problems. Rather, it failed since it was more than-engineered and utilised quite a few high-priced components, a truth which created the plastic solution as well pricey for the target customer market place. The competitor’s knock-off solution has been thriving since they have removed a lot of the price from the solution by working with significantly less high-priced components, whilst nevertheless getting in a position to sustain its desirable overall performance elements. Of course, the SVP’s firm offered the competitor with a road map for solution improvement: customers preferred the solution but just not at the larger price. With a lot of the price removed from the solution due to reformulation of the plastic composition, customers have clamored for the solution. The competitor’s path to good results was therefore each significantly less high-priced and significantly less risky, which drastically improves the ROI of their solution improvement approach.

So why can not the SVP go soon after the competitor by suing on a single or additional of the 18 US patents for which his firm paid so dearly? Pretty basically, the patents cover the INVENTION not the INNOVATION. The distinction is subtle, but crucial. The invention centered on the plastic composition of the solution, that is, how a lot of each and every ingredient was present and how that composition manifested in the completed solution. In contrast, the innovation centered on the overall performance of the solution, irrespective of the plastic composition. The solution was revolutionary (and desirable to the customer) since it performed in a way no other solution ever had just before. When the competitor was in a position to extract the exact same overall performance from a a lot reduce priced composition, the solution not surprisingly skilled market place acceptance.

However for the SVP’s firm, its 18 US patents failed to address these superior overall performance attributes, which the competitor’s solution mirrors precisely. The innovator of the solution i.e., the SVP’s firm, therefore has no legal recourse against the firm that is now profiting from the innovation. Compounding the challenge is the truth that important expense was incurred to safeguard get patents that have been eventually worthless to safeguard the SVP company’s market place.

The explanation for this scenario is clear: the 18 US patents have been ready in a R & D/patent lawyer “silo” exactly where the “cool issue” was regarded as to be the attributes of the plastic composition, not the attributes of the final solution. In such a science-focused planet, the composition was viewed as the crucial function on which to concentrate the patent coverage. (And, clearly, the R & D and patent silo identified the composition revolutionary sufficient to get 18 US patents covering each and every and each and every attainable aspect of the composition.) But, as far as the customer was concerned, the composition did not matter a single bit. So the competitor can now copy the overall performance since the patents do not address what is in truth the crucial industrial function of the solution.

Sadly, the patents could have covered the overall performance of the solution. This solution was genuinely revolutionary. Even so, the folks operating on the overall performance of the solution and its worth to the customer have been divorced from the patenting approach. As a outcome, the SVP’s firm spent quite a few $MM of now-sunk expenses on a failed solution launch. His firm is now also losing market place share in adjacent solutions since the competitor’s solution is gaining in recognition, a truth which compounds the discomfort brought on by the product’s failure.

Just after hearing my explanation for his aggravation, the SVP wondered aloud how to understand from this pricey patent lesson. I told him that the answer was uncomplicated: he have to dismantle the patenting silo exactly where his patent attorneys perform only with his R & D group. Rather, his organization group have to drive the patenting approach at his firm by holding main selection rights on what patent applications his firm files and what these applications cover. No patent applications ought to be filed unless the commercially relevant functions of the solution can also be protected. In addition, prior to filing the applications, the organization group ought to execute design and style-about workouts in which they ask “if this solution becomes thriving in the market place, how will our competitors attempt to knock us off?” The answers to this query will probably stretch the view of the invention, which may possibly let broader protection to be obtained. Such broader protection will invariably make it tougher for a competitor to knock off their solutions without the need of also incurring patent infringement liability.

Of course, not all new solutions possess genuinely revolutionary overall performance attributes that can serve as the basis of broad patent protection. But if a single does not method the patenting approach with the industrial functions of the solution as a concentrate for protection, it can be practically assured that the resulting patent coverage could be as well narrow to avert competitive knock-offs. And, as my SVP buddy identified out, as soon as the patents are filed, the “harm accomplished been did.” If his firm had possessed a organization-focused patenting approach, as opposed to an R & D-focused patenting approach, possibly they could have prevented the competitor from taking some of their organization nowadays by working with the advertising road map laid out by his company’s failed solution launch.

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