CSQ ADVISOR
Steven C. Sereboff
Partner, SoCal IP Group, LLP
Steven C. Sereboff is a partner of SoCal IP Law Group LLP. He has specialized in intellectual property law since 1991. Strategic IP counseling – where business, technology and IP law intersect – has become the hallmark of his practice. Steve founded SoCal IP in 2002 and today his client list is a who’s who of technology companies in LA Uptown.
His practice includes patents (including patent prosecution), trademarks, trade secrets, copyrights, licensing, and contracts. He regularly works with clients to develop and implement corporate IP programs which emphasize quality, economy, and risk management. Mr. Sereboff’s clients include multi-billion-dollar multinationals, medium-sized public and private companies, and growth-oriented start-ups.
Mr. Sereboff holds a B.S. degree in Electrical Engineering from the University of Maryland and worked for seven years in computer software before earning his law degree from Boston University.
805/230.1350
Corporate Patent Strategies
Grounded in the Constitution and guided by economics, technology, and public policy, patent law has evolved as our society developed from agrarian to industrial to post-industrial. About 220 years ago, Secretary of State Thomas Jefferson personally examined each patent application and sorted them in shoe boxes. Today, the U.S. Patent & Trademark Office employs over 6,000 people and manages the largest collection of organized technical information in the world.
Intuitively, patents make sense for most high technology companies, but they also make sense for many low-tech and no-tech companies. The key to patent success lies in using the same business acumen applied to any other business investment. Whether expanding a product line, entering a new market, or filing for patents, a rational business considers up-front costs, life time costs, risk exposure, risk avoidance, return on investment, and opportunity cost. Understand what patents can do for your business and you can create a patent strategy and a sensible budget.
Freedom to Operate
For most businesses, the foundation of a patent strategy should be “freedom to operate.” Freedom to operate is what most businesspeople intuitively expect from an open market. However, others’ intellectual property rights can severely restrict your freedom to operate. Today’s typical patent lawsuit costs $1.5M, so prevention is surely better than the cure. By patenting your products and services, you reduce the risk that someone else will patent them. By building a patent portfolio, you create defenses that discourage competitors from suing you and encourage cross-licensing that avoids litigation. As markets mature, your strong patent portfolio can also deter late entrants from freely riding off of your investment.
Beyond freedom to operate, the typical business will want patents to address down-side business risks. If a market shift leaves you behind, if a major competitor grabs your market share, or if your own business fails, your patents can give you a chance to catch up in the market, take back market share, or recoup investments.
Deciding What to Patent
Among the top ten criteria used in deciding what to patent, my top three are criticality, externality, and patentability. Criticality refers to the importance of an invention to your business. The more important the invention, the more important it is to have a patent on that invention. Externality refers to whether the invention is external or internal. External inventions can be seen, recognized, or known by others using your product, reading your Web site, or seeing your marketing materials. Internal inventions, on the other hand, are known only to company insiders. Because your competitors can copy your external inventions but not your internal inventions, it is best to patent the external inventions. Patentability refers to whether you can get a patent at all.
A decision of what to patent requires balancing criticality, externality, patentability and the other seven criteria. Rather than considering each invention in isolation, I like to make lists of inventions. Each invention gets graded A, B, C, D, or F (I rarely see Ds and Fs!). Then, based upon the budget, we can decide which inventions merit the investment of a patent, and when to make that investment.
This grading and ranking process should take place on a regular basis. Depending on your company’s size and R&D activity, it could be as often as monthly or as seldom as once per year. To make the process work better, a lot of companies incentivize employees to document their inventions. Eventually, patenting becomes institutional, akin to workplace safety and the annual company picnic.
Patent or Patent Pending?
On average, it takes about 3½ years to go from patent application to granted patent. Thus, patent counsel needs to understand your product and the market’s direction. If done well, your patents will retain value for their 20-year life.
Start-ups commonly file inexpensive “provisional” patent applications during initial market tests while arranging distribution and sales channels, and while seeking investors. Then, if it looks as though the product will sell or investors are found, they decide whether to pursue a regular patent. Provisionals give no protection unless they are followed by a regular patent application, but provisionals provide “patent pending” status, can establish a date of invention, and set deadlines for filing a formal application.
Another option is design patents. With their low cost and quick grant time, design patents are a great way to protect a product’s appearance and ornamentation.
The Flowers of Tomorrow Grow from the Seeds of Today
Building a patent portfolio takes time and dedication – something that applies to almost any business venture. Public policy favors early filing of patent applications, and the patent laws have numerous gotchas on deadlines. If you file the application too late, you might lose U.S. and/or foreign rights. Provisional filings raise special concerns. Most foreign countries have “absolute novelty” rules, which bar patenting if there has been any kind of disclosure of the invention anywhere prior to your filing. The U.S. has a one-year grace period on the absolute novelty rule. That is, in this country, you can file your patent application any time within one year of public sale, use, or disclosure. The rules are quite complex, so do not rely on this simplification. The safest approach is usually to file formal patent applications prior to any kind of public disclosure or attempt at commercialization.
Though a garden of patent “flowers” is beautiful, your business can benefit from having even one patent. For most companies that are new to patents, I recommend starting modestly. As your comfort and experience grow, so, too, can the garden.
