Intellectual Property is the global currency of innovation. Whether you are a start-up, development stage, or mature company, intellectual property is likely among your most valuable assets.
Intellectual property is intangible. This makes it hard to value. Patents are complex. They are one of the few exceptions to competition laws worldwide. And, they can be extremely powerful, both as an offensive weapon and defensive shield against competitors. But how do you know you are getting good value?
Patents are complicated for two reasons. First, the market for legal services is very competitive. Vigorous competition benefits inventors through greater choice and lower prices. The price of patent preparation and prosecution (the process of getting a patent) services has been relative constant for decades. But competition has also introduced wide variability in the quality of legal services.
At the same time, Patent Offices and Courts are tightening the requirements to get broad patents. International harmonization has increased predictability but also “raised the bar.” Courts, particularly in the United States, are imposing more stringent requirements on patents. Patents must have an adequate written description. They must adequately support the full scope of the claims. And, they must distinguish the invention from prior inventors’ work.
At the same time, information is becoming more readily available. Information about prior inventors’ work that in the past could not be found through even an exhaustive search can now be located with the touch of a button. Electronic translations are readily available. Patent Offices are cooperating much more effectively. All of this makes it harder to get broad patents. But as with most things in life, you get what you pay for. Patents written without careful thought and on a shoestring budget likely aren’t worth the paper they are printed on.
What is patent quality? This question is particularly relevant to the business community having suffered more than a decade of litigation involving questionable internet and telecom patents. Two years ago, the author attended several of the U.S. Patent and Trademark Office’s Quality Initiative Public Hearings. In a private discussion with the then-Director, we discussed patent quality. The author’s answer as a trial lawyer is simple: A patent must survive the challenges that await it. There are essentially five points in the life of a patent when it will be challenged.
- Investment: Startups are constantly seeking investment. Investors increasingly look for whether you have patented your inventions. Depending on the type and level of investment, the level of scrutiny may vary. It may be modest. But substantial investors will want assurances that your patents will survive and effectively protect your business.
- Acquisition: As the company grows and develops you may attempt to sell the business. And when you do, your patents are also on the block. The buyer will conduct diligence to ensure they are well-written, protect your business, and will survive if challenged. Does the disclosure adequately support the claims? Do the claims adequately protect the business? Are they commercially valuable? Do they adequately cover the company’s current and developmental products? Will they prevent competitors from designing around? Unless all these issues have been thought through and addressed carefully in the original filing, it will likely be too late to do anything about it by the time that you were discussing these issues with investors.
- Licensing: Your patents will be stress-tested if you try to license them. Nobody pays top dollar unless they are getting what they are paying for. Your licensee is likely going to conduct prior art searches and test the patents to see whether the claims are patentable. Do they preclude obvious design arounds? Will designing around will cost more than paying royalties under a license?
- Post Grant Challenge: Europe has had post-grant challenges for decades. In 2012, the United States established a post-grant procedure. The United States and the European Union are formidable markets. Will your patents survive post-grant challenges in them? If they were prepared poorly on a shoestring budget, not likely.
- Assertion: Ultimately, you may be forced to sue to enforce your rights. And when you do, the defendant will likely deny infringement and assert invalidity. Will your patent survive these challenges? Is the disclosure written clearly? Is it broad enough to support the full scope of the claims? Have you thought through how your invention is different from prior inventions, and not just from the art you were aware of when you filed? Once you sue, the defendant will be strongly incentivized to look a lot harder than you did when you filed the application. Will your patent survive? Or will it fail at the time when you need it most?
Quality boils down to your patent’s ability to survive all these challenges. Invest the resources appropriate to the significance of your invention to your business. Draft the application carefully. Adequately describe your invention. Differentiate it from prior inventions. Anticipate how others will design around it. A patent that survives these challenges is truly a high-quality patent.