Development of a Patent Portfolio: Know Thy Business Plan First

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Is your company's patent portfolio primarily based on considerations such as the R&D budget, legal budget, inventor availability, and office politics. And, is your strategic business plan near the bottom of the ladder of considerations? If it is, you may be reducing your profit line.

Determining what technology to patent, where to patent it, and how much to spend on it is often difficult for a company. Focusing on the R&D budget, legal budget, and time availability of inventors instead of the business plan can lead to a murky patent strategy. This is because looking at matters such as the budget may not be consistent with the view from the business plan.

Making patent portfolio decisions without deciding how they fit the company's business plan has a low probability of producing the ultimate results sought - increased profits and stakeholder value. Indeed, ignoring the business plan while developing the company's patent portfolio can lead to wasted money and decreased profits.

Competitors
An identification of its competitors can guide a company in deciding what patents should be included in the company's portfolio. This is because a patent gives one the right to exclude another from making, using, or selling the patented invention. In other words, a patent gives one the ability to affect a competitor's actions.

For example, a competitor with significant financial resources might enable the competitor to expend large amounts of R&D dollars to develop its competing products. It might also enable the competitor to aggressively pursue patent infringers.

Expending more funds to develop a family of patents for multiple products and/or aspects could force the financially strong competitor to design competing products that are significantly different from those of the company. It could also prevent the competitor from making products that are not even made by the company. Multiple patents could additionally slow the competitor in pursuing the company for infringement and motivate the competitor to seek licenses from the company.

Target Markets
Geographically, a company's business plan may call for selling a product in one part of the world but not in others. In such event, there is little reason to seek patents in those other parts. Nevertheless, it may be fruitful to employ a patent strategy that effectively extends the time within which patents can be sought in those other parts of the world if there is the possibility that sales might later be sought there.

One part of the world may represent a greater potential for sales than another part. In that event, a greater expenditure of funds for patents where there is a greater potential for sales might be warranted. The greater expenditure of funds may not only relate to the number of patents, but also their quality. Thus, a company might be justified in expending more funds to ensure that a specific patent office is granting the company patents that are not unduly limited in scope of protection.

Profit Projections
Common sense dictates that a company could better justify expending more funds for patents on those products or services with the higher profit potential. Otherwise, if competitors can more freely provide an acceptable substitute, then the company's sales and even profit margin may fall.

Profits may not only come from direct sales, but also from licensing. Indeed, due to the savings in manufacture and distribution, a licensing strategy may present a more profitable revenue source than a direct sale strategy. Therefore, even though a company may not have an immediate plan to market a product, licensing opportunities should be considered in deciding whether to pursue patent protection.

Product Life
A company may have as part of its business plan a strategy to sell a product for a limited period of time due to various reasons. The company's determination of the life of the product should be a factor in seeking patent protection. With a shorter the life span, there could be less of a justification for patent protection. Likewise, a product with a longer life span can justify a larger expenditure for patents. With the time that it now takes for a patent application to be prosecuted through the U.S. patent office, a product life of about 2-3 years may not warrant seeking a patent since a patent may not even issue before the end of the product life.

Conclusion
Deciding what to patent and how much to spend on the patent is not a series of black and white answers. Yet, making the decision in the absence of how it fits in the company's business plan could lead to an undesirable result. Cooperative planning between company management and patent counsel may avoid the undesirable result and better meet the goals of the company's business plan.

 

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