Are You Missing Out on the Defensive Value of a Patent?

As the adage goes, “the best defense is a good offense.”  While this principle may very well hold true in warfare and sports, an all-out patent offensive is not necessary to see value from patent protection.  Patents are commonly viewed as a “sword” with which you can use to go after or attack the opposition.  Alternatively, patents can also be used as a “shield” to defend your company against the opposition. What are some benefits that can be afforded by “defensive” patent protection?

1.  Litigation avoidance through patenting of key technologies

Although litigation avoidance is a goal of most companies, startups and emerging companies are especially vulnerable to the detrimental effects of a potential infringement patent suit.  The cost associated with resolving a potential patent infringement suit can quickly deplete a young company’s limited resources or compel a company into taking a license with unfavorable terms.  However, it is possible for a company to avoid these situations by establishing patent rights around key technologies and innovations before others have the opportunity to patent it.  By securing patent rights to key technologies or innovations early, you can cover your products while creating potential infringement issues for your opposition.  More importantly, pursuing patent protection for promising technologies ensures that the innovation is available for you to use in future products.  Conversely, if a competitor patents an improvement on your technology, it could potentially limit your freedom to operate.

2.  Patents as deterrent to competitor lawsuits

Patents can effectively operate as shields against patent-holding competitors.  To this end, competitors may refrain from suing another patent holder for infringement for fear of a possible countersuit for patent infringement.  Because relevant patents can be used as a potential source of prior art, companies often are more reluctant to litigate its patents against other patent holders due to concerns that the asserted patent may be found invalid.  After a patent has been invalidated, the patent can no longer be enforced against anyone, including key competition.

3.  Patents as tool to negotiate cross-licensing agreements

Even if faced with the prospect of a possible patent infringement suit, having patents around relevant technologies can provide a company with leverage to negotiate a cross-licensing agreements with the competition.  For example, owning patents related to an improvement to a competitor’s technology can be a valuable bargaining chip.  A cross-license to a competitor’s patent often can be preferential to a burdensome licensing agreement or potential litigation.

4.  Patents and indemnification of customers

Owning patent rights to technologies utilized in your products are useful in sending a message to your customers (and opposition) that the underlying technology was developed and patented by your company.  Notwithstanding the foregoing, many customers, particularly larger entities, will still demand certain assurances from your company before selling or using your product.  Specifically, customers may require indemnification against infringement suits in connection with the use or sale of your product.  Having patents related to your products can provide some assurances to the customer, and at the same make it easier for your company to agree to broader indemnification provisions.

5.  An effective patent portfolio can help protect future development and growth

All companies that are developing new products should analyze its activities to ensure it is employing effective patent protection strategies around its technologies.  Effective patent portfolio management should incorporate protecting features and innovations that extend beyond specific products, identifying advancement opportunities around your key technologies, and monitoring your opposition to identify opportunities and threats.  For most startups, their patents are often its most valuable asset, and the minimal cost of securing additional patents in related areas around key technologies is relatively low compared to the potential returns from investors and purchasers.  Good communication between your company and your legal team is essential for protecting innovations, building an effective patent portfolio, and providing value to stakeholders.