The patent portfolio management is a complex strategy, which is made even more complicated by the presence of patent thickets or the problem of excessive patents. Patent thickets are a bunch of overlapping patent rights that generally many large and well established companies own. The whole purpose of such wide-scale patenting by bigger companies is to safeguard their technology and products in the market. Companies know that acquiring patents is a slow and expensive process, so incumbent technology firms always try to acquire a lot more patents as against up-and-coming firms, also known as start-ups. The problem with these patent thickets is that they almost make it impossible for other firms to innovate without infringing already patented numerous patents of these companies. For instance, the patent thickets owned by IBM, Microsoft and other such big companies as Apple and Samsung to name a few act as a tax on innovation.
The problem has gotten worse since the US courts lowered the bar on patent quality in the 1990’s. For example, Microsoft has been granted more than 20k patents in the past decade empowering it to force 80% of Android vendors (by market share) to pay royalties to use software created by Google. That’s not because Google stole Microsoft’s source code. Rather, it’s because Microsoft has so many broad patents that every modern operating system infringes many of them. There are many related problems with patent thickets with which all of us are familiar. NPE’s (Non-practicing entities) or patent trolls have also emerged due to patent thickets and many reforms have been proposed to fight the problems posed by them. Non-practicing entities somehow manage to acquire one of the patents in a patent thicket and start looking for startup companies looking to innovate or even larger firms. NPE suits almost doubled from 2011-2012 and worse hit by the NPE litigations were the small companies. Bigger companies hit by such lawsuits also often had to pay higher damages.
So, by now it is quite clear that though patent thickets can earn loyalties for some big companies, they can still be a problem for them as it also empowers patent trolls or NPE’s while startups are hit hard by this problem. So, this issue needs to be effectively tackled. Every company must realize that in order to get commercial success, besides inventing and patenting, getting licenses from several different sources is a must before entering a market. Another most pragmatic route to is getting a Freedom-to-operate patent search conducted. Freedom-to-operate searches, also variously known as Infringement Searches, Clearance Searches and/or third-party IP Rights Searches are analytical studies that help in identifying whether a product/service may possibly infringe an active or pending third-party patent right. If this kind of patent search is conducted prior to launch of the product in the market for any/all jurisdiction and each of the features of the product is well investigated against all the features of the existing product in publications/patent literature/non-patent literature etc., it will most likely avoid any legal hassles of infringement post launch. This information is valuable tool that will secure a company’s rights on their product.
Many more reforms are on their way to facilitate making the patent trolls untenable. The existing laws such as covered business method (CBM) program are already in use but are not fully effective. Under CBM program, the process to invalidate patents is expedited and all the patents that were granted erroneously could be invalidated using this facility which is available with USPTO. It was effected in 2011 and was initiated by financial services industry and though it empowered defendants to get to the patent office and invalidate patents via a new and less expensive process, it was restricted to this particular sector only.
So, for companies operating in other sectors, awareness of risks associated with their technology is a must as it might pose problems for them in the future. Patent litigation is likely to arise when a patent earns revenue for its owner, if it is around an active technology, and when there are well-known competitors in the space, or you’re nearing an initial public offering (IPO). In such times, a company is particularly vulnerable for patent litigation and its threat can make accessing the public market much more difficult. Thus, rather than waiting for proposed reforms to come into effect, taking the aforementioned measures proactively will enable such companies to deal with the patent thickets and NPE issue effectively.
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