How do you prevent competitors from obtaining patents that could block you from using your own innovative ideas in your products and services? This critical question faces managers of innovation and intellectual property throughout the global economy, which is increasingly embroiled in a hotly contested patent race.

Issued patents can be deadly. Enterprises of all stripes face burgeoning risks that competitors will obtain blocking patents. Even strong manufacturers with worldwide distribution, well-branded products and adoring customers can be stopped dead in their tracks by broad competitive patents.

Just how deadly are competitive patents? Consider this, if your competitor is granted a patent broad enough to prevent you from making or selling products and services, you may be forced to litigate. Average legal fees to defend a patent case are over $1.5 million regardless of the outcome. Verdicts and judgments in patent cases can easily exceed eight figures. Even greater costs can be incurred in attempting to design around competitive patents after product launch, or being shut down by a preliminary or permanent injunction.

There are myriad methods for protecting innovation and intellectual property. One answer is to join the patent race. But be prepared to spend. Average legal fees to file one patent application in the U.S. are in the range of $12,000-$15,000. Multiply that by three or four to file applications in key locations throughout the world. Then add over $100,000 to maintain each patent in those locations throughout its life. All that cost for one invention. The problem grows when you consider that for most companies, the number of inventive ideas exceeds the number of budgeted patent applications by at least ten times.

To compound the "cost of getting a patent" problem, consider the recent Supreme Court ruling (KSR Int. v. Teleflex, Inc.) relating to an overwhelmingly important concept called "obviousness." This verdict has essentially made it harder to get patents and harder to enforce already issued patents. This means patent acquisition cost has gone up and patent value has gone down. In most cases, it is simply not cost effective to go through the patent process.

What are the alternatives to patenting?

If created and protected correctly, trade secrets can have real value. But, beware. In today's environment, protecting trade secrets is often unrealistic. Increased competition has driven more aggressive pursuit of information by competitors with access to previously inaccessible data sources and previously unheard of data mining tools. That, coupled with increased employee mobility and ease of communication has made it virtually impossible to keep secrets. Companies may not appreciate the risks associated with the use of trade secrets until after they see their ideas claimed in competitive patents.

Pros and Cons of Patents, Trade Secrets, and Defensive Publications

Patents -- Pros Patents are powerful

Quasi monopoly... prevent competition from making, using, or selling your invention

Licensing revenue

Higher product margins

A tangible corporate asset

Patents -- Cons

Patent protection is territorial

Patents have a limited duration

Patents have limits of scope

Expensive Tens of thousands of dollars to prosecute (obtain) Hundreds of thousands of dollars to keep Millions of dollars to defend With the new Court Rulings, they are harder to get and harder to enforce

Time Consuming Lengthy process to write and file Typically takes three years to grant To obtain and defend requires a large investment of time from key corporate employees

Lack of enforcement in many countries

Fact of life: Most patents are never used for any purpose

Trade Secrets -- Pros

An unlimited term (as long as the secret remains secret)

Applicable to a wide variety of technologies

Lack of standards to meet

Civil and criminal penalties for theft Court can bar former employees from using or taking secrets to competitors or using Money damages

Undisclosed in the marketplace -- less chance of discovery

Trade Secrets -- Cons

Risky -- loss of protection if the secret is disclosed

Process MUST be in place to establish a secret as a "Trade Secret"

The existence of well-established defenses against infringement (including claim to independent discovery, inadvertent disclosure by owner, and reverse engineering)

The requirement of a "separate, actionable wrong-doing" for infringement

Lack of enforcement in many countries

Defensive Publishing -- Pros

Inexpensive method of blocking competitive patents

Immediate way to protect incremental improvements to already patented technology

Anonymous publications can thwart competitive intelligence

Defensive Publishing -- Cons

Double-edged sword -- all patent rights are burned

Potentially ineffective if not published in proper publication outlets -- patent examiners need easy access to find and cite prior art

Another alternative is defensive publishing, which requires disclosing an enabling description of an innovation so that it enters the public domain and becomes prior art. Appropriately placed defensive publications can protect your freedom to practice without patenting. Well-placed defensive publications are valuable for two reasons: first, to support examiners in preventing overly broad competitive patents from issuing; and second, in cases where overly broad patents have issued, to be available and admissible years later to form the basis for an invalidity defense in a patent case.

View article on one page