The ability to secure and even improve your company's competitive position is often based on obtaining and periodically evaluating the breadth and depth of your intellectual property (IP) rights. However, not every company realizes the full value. Unless your business plan is to become a commodity purveyor, it is essential to establish and be acutely aware of the scope and limits of your IP rights, ranging from trademarks for your products and/or services to an array of patents and trade secrets, where appropriate. This is particularly vital for companies and investors in the biomedical industry given the significant time and costs associated with product development. Below are key due diligence considerations relative to offensively and defensively protecting your IP rights.
Establish Your Boundaries
Once your company establishes an IP position, you must keep ahead of your competitors and manage risks that may arise from competitors' IP. It is essential to identify and clearly understand the extent and limits of your full range of IP rights. In short, know the value of your IP.
In order to identify your rights, you should investigate the scope of your own IP rights (and your competitors' IP rights) early in the development of any new or improved products and services. Such good planning not only will add value to your business but will provide a clear path to selling products or services by virtue of managing the risks of infringement of a competitor's IP rights. On the other hand, the lack of such actions can be signs of shortsighted business practices and a company with a limited future. Consequently, a company wishing to remain competitive, looking to sell the business, or seeking financing would be well advised to be knowledgeable of its "right to use" its own products and services and also identify, cultivate, and enforce its own IP rights via an established internal, periodic due diligence procedure.
Maintain Your Market Edge
Your company also must maintain a competitive advantage by continually enforcing your IP and improve on those IP rights (or de facto lose them).
Take the case of a small company that put intensive efforts into identifying and developing the full scope of its IP rights and understanding the limits on its right to make, use, and sell its products. This due diligence paid off when the firm, as a standalone entity, was able to expand its market position by virtue of its well-protected new product line and had completed a “freedom to operate” evaluation. Thus, not only was the technology well-covered in its U.S. patents, but after a thorough research of active U.S. patents, it was determined that the technology did not infringe on any U.S. patent (particularly its competitors').
Prepare for the Unexpected — Monitor Your Competitors
The unfettered right of a company to make, use, or sell certain technology, or use trademarks or material subject to copyrights, is often crucial to the survival of any business. If a competitor holds patents, trademarks, copyrights, or other related IP assets that dominate a product or service of its competitors, your profitability, and even your company's ability to survive, may be at stake. Therefore, if a your company values its economic future, you also should periodically monitor the IP rights held by competitors.
Generally, when a business is unaware of, or deliberately ignores, those rights, it is highly likely that a competitor will, when least expected or desired, act to enforce these rights and prevent a company from infringing on the competitor's IP rights. These scenarios can often be “bet-the-ranch” business matters.
Investors in a company or those considering acquisition of rights in a company should be especially alert when a target company has not been diligent with managing its patent and trademark rights and understanding the rights of its competitors. If a competitor's patent concerns an area of technology essential to the company's new product sales, an oversight can severely injure the company's vitality and the investor/acquirer can wind up a big loser.
Consider the example of the company with a strategy of rapidly developing and aggressively marketing new product lines. Unfortunately, the company lacked an appreciation for the patent system. The company got into trouble when it spent hundreds of thousands of dollars on a new product line but gave no serious thought to checking its competitors' patents or securing its own. When the new line was introduced at a trade show, competitors informed the company that it was infringing on a number of U.S. patents issued over the previous years. The company could have spared itself great pain and expense by performing the above-described due diligence. Instead, the company was forced into a burdensome license, which could have been worse since the patent holder did not have to grant a license.
Before embarking on product development, consider these steps relative to the project and company's overall IP program. The above described protection approach can, if practiced carefully, provide the foundation for a successful company. On the other hand, if not done properly, failure to have a well-run IP program can lead to decline of market share, wasting company R&D funds, and even destruction of a company.