Innovation has become seemingly synonymous with operating a successful business as the projected success of a company is measured by both its ability to innovate and its track record of innovation. Patent law is an area of law tasked by the U.S. Constitution to promote innovation. Patents and innovation should therefore ostensibly have some correlation for business.
The extent of this correlation is less clear. Part of the reason for the lack of clarity is the range of ways in which patents may be used (or not used). For example, patents may be used to drive internal innovation, protect product markets, ward off litigation, or generate licensing revenue. Take for example, IBM, which has a track record of innovation. In 2019, IBM marked its 27th year in a row as the top recipient of U.S. patents. IBM’s likely motivation for patent filings is less opaque, with revenue from its licensing program exceeding a billion dollars in 2017. The New York Times also reported on the novel ways in which many businesses use patent portfolios to lower tax liabilities. (In a more traditional approach to patent use, Caltech was recently awarded a $1.1-billion patent verdict.)
While the motivation for patents may vary between businesses, the number of new patent applications continues to rise as described in the recently released 2019 Performance and Accountability Report from the U.S. Patent and Trademark Office (USPTO). As shown in the chart below, the total number of U.S. patent application filings have risen at a relatively consistent rate over the past 20 years. In fact, annual patent filings seem remarkably resilient, with the 2008 Global Financial Crisis and more recent substantive and procedural changes accounting for only minor down years in an otherwise steadily upward trajectory.
So top innovators, with a potential range of motivations, continue to file patent applications, and the total number of patent application filings in the U.S. continues to rise. What can business decision makers do with this information? Industry patent strategy axioms such as “size matters” or “quality over quantity” have traditionally wooed businesses into viewing patents as a reliable, albeit subjective, venture that is “just the cost of doing business.” These axioms, however, have gradually been replaced with calls for a “business-oriented” approach. That is, each business must (i) understand the myriad strategies in which patents may be used, (ii) determine whether adopting those strategies will help achieve its unique business goals, and (iii) weigh the costs, in terms of time and money, of pursuing that strategy.
A foundation of the “business-oriented” approach is, therefore, being innovative in developing new patent strategies to fit the unique goals and constraints of each business, as shown by the approaches of IBM and Caltech above. Businesses cannot simply rely on the traditional roles of patents or maintain their conventional approach to patents. Like in all other areas, businesses must demand innovation out of their patent strategies and patent counsel. A first step to determining a patent strategy is identifying a goal and determining which strategies, including innovative ones, help the business achieve that goal. Factors in whether patents may achieve that goal may be either internal (e.g., what is the current IP, technological, or market strength of the business) or external (e.g., what is the current legal climate, state of the industry, or legal capability of the business), and these factors may also bear on the cost, in time and money, to achieve the goal.
Once the goal is set, the business must work to, and monitor the progress toward, that goal through definable results. But how should business define these results? In many cases, the definable results may differ based on who is using the results and how they are being used. For example, executive-level decision makers may prefer easily digestible metrics, whereas patent counsel may need (and should require) substantive analysis verifying those metrics. While patent quality is notoriously subjective, tools such as claim charting reads on products, patent summaries for strategic decision making, and dashboarding the coverage of the portfolio as a whole are instrumental in maintaining quality and avoiding mission creep.
With the results identified and tools in hand, the steps necessary to achieve that goal should be solidified. For example, if the goal is to drive internal innovation, steps should include setting metrics for patent filings/issuance in technical areas, reviewing how contributions are elicited from the sales and engineering teams, and ensuring patent filings are directed to potential future products. If the goal is to protect product markets, steps should include setting metrics related to coverage of the business’s key products, and key features in those products, and protecting those products and features through robust patent continuation practice. Alternatively, if the goal is to ward off litigation or generate licensing revenue, the analysis should look to products and features of competitors and the industry as a whole—both where the industry is now and where it is heading.
Most importantly, businesses must avoid autopilot. From generating the ideas underlying patent filings to coordinating a portfolio-wide patent strategy, businesses cannot simply acquiesce to doing things the way they have always been done. This docile acceptance is the primary antagonist of innovation. Accordingly, businesses should routinely ask what else can be done and how it can be done better. This is particularly true as the law related to patents and the patenting of new technology continually changes.
For example, both the U.S. Patent Office and the European Patent Office (EPO) have actively revised guidance and guidelines related to patenting artificial technology. In another example, the European Patent Office continues to creep closer to implementing a unitary patent that drastically reduces the fees in maintaining and enforcing patent rights in Europe. Upon its implementation, two patents (e.g., one in the USPTO and one in the EPO) may potentially protect use in, or importation to, roughly 40% of the world (based on gross domestic product). In yet another example, the rise in post-grant proceedings in the U.S. has necessitated the need to draft applications and claims with an eye to surviving challenges in these forums.
Businesses should also not shy away from implementing new technologies when viewing, using, and creating their patent portfolios. Advancements in data analytics and artificial intelligence can provide real-time feedback on the direction and success of patenting strategies. Businesses should likewise push their patent counsel to familiarize themselves with these new technologies and optimize their use. While AI-based patent application drafting is still beyond the horizon, current products in this space may reduce drafting time and increase the quality of patents by catching typographical mistakes, lack of support for key terms, and improper antecedent basis, issues which may negatively affect the value of an issued patent.
In today’s business world, the difference between winners and losers can be their speed of innovation. The Founding Fathers understood this when they establish patent rights in the Constitution. The irony is that while patents may have been created to protect innovation, innovations in patent use may now protect the business.