Patent Usage By Small Business In The US: A Neglected Line Of Business

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The more time I spend working in the patent and trademark field the more apparent certain inequities become. Despite what appears to be a sincere effort by the USPTO, large business entities continue to prosper from the use of patents and trademarks. Smaller businesses still don’t catch on, and for the most part, not only don’t get their revenue share, but often become victims of the system.

My purpose here is to simply point out, in practical terms, how large businesses use the patenting system to protect their products in the marketplace, discourage competition, and  often create a new revenue stream for themselves. And to explain how smaller businesses, with just a little savvy and the right legal representation, can accomplish the same thing.

First of all, why is it that larger businesses have so many productive patents compared to smaller businesses? Notice the distinction I make regarding a productive patent as opposed to the type of patent so many small businesses and independent inventors end up with. Well, for one thing, the larger companies know how to play the game. When they develop a new product and feel it may be patentable, they go to an established IP law firm to get their product/invention protected. They don’t get distracted with misleading information, which runs rampant on the internet, about how to get a patent. If they’ve got something they think is valuable, they hire qualified resources to protect it. They don’t shop for the cheapest provider and they don’t try to patent it themselves. They get an expert to do the job. This distinction is critical in the process. While the smaller company might think they are saving money by trying to patent their product themselves, or having one of the cut rate patent services do the job, they miss the big picture. The smaller companies go out and try to find the cheapest way to get a patent. The larger companies go to an expert IP law firm and ask “how many patents can we put on this product?”  This is a critical distinction, because the larger firm recognizes that to be in a position to enforce the patent protection, the more patents you have the better. The smaller firms and independent inventors think one patent will do the trick. They also think all patent applications drafted on the same invention provide the same protection. They couldn’t be more wrong.  And the large business entities are fine letting the small businesses believe this myth. So point number one for the small business to recognize is that patent expenses are a wise investment. Usually the cost of using the patenting procedure to protect the invention/product in the marketplace is a small percentage of the cost of marketing. Large companies know this and respond appropriately. Smaller companies try to cut corners and save money, thus ending up with a weak patent which may well be useless when trying to sue for patent infringement. Chalk one up for the big boys.

A second patent area where small companies fall woefully short is strategic patent planning. Once again the big boys benefit from having the advantage of being able to afford working with IP law firms that are experienced in these patent strategies and can put them to work for their clients using practical means. These strategies can seem complicated to the small inventor with limited experience, or the small company being exposed to this for the first time. There is a great deal of variation in this area, so much so that it makes it difficult to describe here the different approaches available. Suffice it to say that when the drafting of even Provisional Patent Applications take place, significant attention should be paid to the company’s marketing strategy for that invention/product. Remember, from the time that original patent application is filed, to the time the issued patent expires, can be 20 years. The marketplace will change many times during that period. Large companies try to work with IP law firms that recognize this, and will incorporate the changing marketplace into their patent application strategies. Small companies are usually clueless to these strategies. Score again for the big boys.

A third patent area where the smaller companies fall short is in the assessment and validation of competitor’s patents affecting their market share.  Most smaller companies are not on top of their competitors patented products/inventions. They may be aware that they lose sales to a competitor’s product, and they may even be aware that the product/invention has a patent on it. But they are not familiar with or capable of truly assessing that specific patent in regard to that specific product/invention. They often are unaware that the patent on their competitor’s product/invention is invalid. Therefore, their competitor should not be stating that their product/invention is protected by a patent. Additionally the competitor may be liable for damages due to this misrepresentation. Larger companies know how to have the specific product/invention assessed with regard to the patent, and take appropriate action. Not only can the larger companies then attack their competitor’s product in the marketplace, they may have a new line of business available, consisting of damage suits for lost business. In the case where the invalid patent is on a component of a product, the legal ramifications can rapidly multiply and may affect several companies, increasing settlement figures drastically. Once again the larger companies, working with experienced IP law firms, can take advantage of this situation. The smaller companies lack the wherewithal to recognize the situation and get in the ballgame. Strike three for the small guys, score a shutout for the big boys.

So where does this leave the small business person as far as using patents to further their business plan? Well, the landscape is not as bleak as it may seem. The cost for the above mentioned services is usually what keeps the big boys on top of the small guys. Usually the IP legal expertise that is required comes at a high price. And here is where the true challenge for the small business person comes. How to find the legal expertise that is needed, at an affordable price? This is the challenge.  Once this resource is located, the expenses associated with using the patenting process effectively will be mitigated by the returns of the marketplace. Just as the larger companies use the patenting procedure to discourage or eliminate competition, solidify market share, and even create new lines of business, the smaller company will do the same and reap the same benefits. This effectively frees the smaller company from the IP legal costs, since the returns, if managed properly, should far outweigh the expenses. But how do you find the right IP law firm? The key is in the questions you ask, and the responses you get from the law firm.

Here is my suggested checklist of questions to ask the prospective IP law firm:

  1. Has your firm worked with small/medium sized companies in the past?
  2. Does your firm offer fixed price fees, or strictly hourly?
  3. For what services do you bill hourly, and when do you provide fixed fees and price quotes?
  4. How many attorneys work for your firm?
  5. How does your firm handle assignment of cases covering various technologies/industries?
  6. Does your firm handle litigation?
  7. Does your firm perform Patent Validations, Freedom to Operate Opinions, Infringement Analysis’s?
  8. Does your firm provide consultations with knowledgeable patent/business resources who are non-attorneys? How do you charge for this service? What are the qualifications for these individuals?
  9. Does your firm encourage its clients to provide as much complete information as possible, in order to minimize costs?
  10. Does your firm provide ongoing patent monitoring services?
  11. How does your firm assess the client’s needs and propose cost effective solutions? How does it charge for this service?

The point to these questions is to find an IP firm that will not be too big, nor too small, to provide you service. But they should have experience working with smaller firms providing specialized patent services. They should be able to provide litigation services if necessary. They need to have a flexible corporate structure, one that doesn’t overload them with multiple high priced attorney overhead, but still provides the variety of technical backgrounds necessary. They should have a flexible pricing structure, charging fixed fees where possible, and hourly fees only where required. They need to be able to explain their approach to assessing the patent strategy you will need, explain it clearly, and not charge a fortune for this service. They should be open to encouraging the client to do as much support work on each project as possible, thus engaging the client deeply in the project and minimizing legal expenses. It is often helpful if the firm has an experienced business professional in charge of their marketing and client relations, preferably a non-attorney. This provides a knowledgeable individual not usually oriented towards billing hourly for services. If this person has a business background he/she will often be able to recognize and address the client’s needs effectively, and present them in a practical way to the attorneys involved. This person serves as a bridge between the firm’s legal minds and the client’s business needs. One who can represent the client’s point of view, but also can express certain practical legal issues without providing a formal “legal opinion”.   Most importantly, this person must recognize that the client’s ability to engage the firm and pay the associated fees is directly related to the financial return to be gained by the client, not by the law firm! Anything else and the client is better off not getting involved.

So there is the challenge, find this law firm! Not easy to do, but they are out there. And if the small business person is successful, you can reap the benefits of the patenting procedure along with the world’s largest companies.

From the author: Virigina Patent Attorney
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