The success of your new venture depends on avoiding costly and time consuming patent litigation. Mature companies often engage patent counsel to provide “freedom to operate” opinions with respect to specific products or services based on a thorough review and analysis of the patent law landscape. These opinions can be expensive, however, and beyond the means of most startups. If you are looking to manage potential risk of patent claims, but cannot afford a more thorough legal review, consider using the following four-step guide to survey the patent landscape, assess risk, and minimize the impact of competitors’ patents on your freedom to operate:
1. Identify Key Competitors
Make a list of the companies you compete with most directly. Include companies that offer products most similar to yours, as well as established incumbents most likely to be impacted by your entry into the marketplace.
2. Check Competitor Patents
Use a tool like Google Patents (google.com/patents) or Free Patents Online (freepatentsonline.com) to search for competitor patents. Search on competitor name and a few key words that best describe your technology. Identify patents most relevant to your product and consider whether your product falls inside the scope of the patent claims, which are located at the end of the patent in numbered paragraphs.
3. Check Litigation History
If you conclude that a competitor’s patents are relevant to your business, check its litigation history. Search Google using keywords including the competitor’s name, “patent”, and “lawsuit” or “infringement” and look especially for competitor-on-competitor cases where your competitor was plaintiff. Many companies view patents as defensive weapons and never enforce their patent rights. For example, Twitter adopted the Innovator’s Patent Agreement, which prohibits assertion of patents owned by the company unless it first obtains permission from individual inventors. See github.com/twitter/innovators-patent-agreement. Google similarly made an Open Patent Non-Assertion Pledge: google.com/patents/opnpledge/pledge.
4. Assess Risk and Consider Evasive Action
If you conclude that core aspects of your product may be covered by one or more patents owned by a competitor and that the competitor is likely to enforce its patent rights against you, consider each of the following issues:
- Are you indemnified? Component suppliers usually indemnify customers (i.e., provide (usually limited) liability protection) against claims that read entirely on their products, but not patent claims that cover their product as a component of a larger patented product. If you are not indemnified, consider whether you could acquire the entire potentially infringing component from a third party that would indemnify you, and how doing so would impact your business.
- Can you design around? A patent claim is only infringed if every limitation is present in an accused product. Focus on the broadest relevant patent claim and consider the time and cost to change your product to avoid infringement or reduce infringement risk.
- Can you license the patent? If designing around is not feasible, consider the pros and cons of proactively seeking a license. This option is rarely attractive unless you conclude that there is a good likelihood that you could obtain a license on reasonable terms (e.g., because the patent covers an industry standard and is available for license to any company) and that the viability of your business depends on obtaining a license.
- Is purchasing insurance worthwhile? Insurance premiums for small companies with no history of patent litigation are often very reasonable. If a claim is asserted against you, having insurance can transform the ensuing lawsuit from a “bet the company” problem into a manageable distraction.
If none of these options seem appropriate and you feel like you are facing a major unresolved business risk, contact a lawyer for advice. If you can prove that the patent is invalid, the United States Patent Office offers a process for challenging the validity of U.S. patents after they issue, but that process can require a lot of time and money. Otherwise, periodically revisit these questions and reassess your situation.