Editor: What are the areas of greatest collaboration between corporate IP departments and outside counsel?
Capraro: There are several areas of significant collaboration. Two areas include litigation matters and transactions. Another area of collaboration, one in which I am most familiar, is patent and trademark portfolio development. On the patent side, a continuing relationship exists with regard to the invention disclosure process, patent filings, the prosecution with the U.S. and foreign patent offices, and third-party patent issues. On the trademark side, a continuing relationship exists with respect to selecting trademarks and prosecuting them to registration in the U.S. and overseas.
Editor: What are the most significant budgetary issues that legal departments face with respect to their IP-related activities? Has enactment of the “first to file” provision of the America Invents Act affected this process?
Capraro: Over the last five years, patent portfolio development has changed in a significant way as the world’s economy has changed. Corporate legal departments are trying to maintain or even increase a desired level of patent activity with a flat or smaller budget. This challenging situation has given rise to fixed and alternative fee arrangements with outside counsel. Corporate legal departments have hired more highly qualified personnel to manage their patent or trademark work and have limited their interactions with only those outside counsel who are best equipped to handle their technology areas.
The “first to file” rule will affect patent activity when implemented in March, 2013. It should not dramatically alter the level of activity of a corporate legal department, but it will alter the priority of projects because by not filing right away, companies risk losing their patent rights. Companies will be forced to reprioritize, treating new inventions as a top priority.
Editor: How does the legal budgeting process tie in with a company’s broader patent prosecution strategy? What are the important considerations when planning for potential developments, such as post-grant, reexamination or reissue proceedings and/or litigation?
Capraro: Regarding your first question, the short answer is the two are inextricably linked. More patent filings obviously cost more money, so when companies are planning their budgets, as a starting point, they estimate the amount of money associated with their desired number of patent filings. Of course, the patent budget needs to fit within an overall budget that includes technology projects and other business activities. Again, the short answer is all of these components are inextricably linked to the company’s business and intellectual property priorities.
Regarding post-grant and reexam and reissue proceedings, companies are going to have to be mindful of significant budgetary hits that will come with these sometimes unexpected activities. Each of these proceedings is a significant budget hit that can’t be predicted clearly. Companies need to be mindful of the fact that these types of proceedings will become popular very soon and create uncertainty in their budgeting process.
Editor: My understanding is that the America Invents Act was intended to bring down the cost of filing a patent and sustaining it, but these additional post-grant challenges would seem to challenge this proposition.
Capraro: Your observation is accurate. Maintaining a patent and having that patent survive post-grant challenges could be an expensive endeavor – although lower than in the case of litigation. Big picture, this practitioner expects that there will be higher post-grant activity leading to higher costs to maintain your patents.
The AIA procedures will provide different avenues short of litigation to challenge patents. Over the past several years, patent challenges have occurred more frequently through the patent office rather than through litigation, resulting in a higher cost to maintain a patent over its lifetime.
Editor: How should companies decide what to patent? What legal options might they exercise in the process (such as provisional filings, omnibus patent applications and international protections)?
Capraro: Deciding what to patent is a very difficult question to answer in simple terms. Basically, the patent strategy should be set in the early stages of product development and then revisited on a regular – i.e., annual – basis. Deciding on which ideas a company should patent is really a business issue based on the need to create barriers to entry for its competitors. I recommend that a company pursue a mix of different types of patent protection – from very broad-concept patents to narrower patents that cover important design features – because the overarching goal is creating numerous barriers to competitors. Also, there are many patent filing options available: provisional filings allow the company to pursue a patent filing later; omnibus patent applications protect a robust invention by covering multiple features in a single large patent application that could spawn many patents; and, finally, international protection is available for companies with a global reach that desire patent protection abroad. All of these options lead back to budgetary costs, but all are important factors in an overall patent strategy for a company.
Editor: What economic factors figure into the analysis of how to develop and maintain a robust IP program?
Capraro: To maintain a robust program, a company needs to determine the percentage of spend on intellectual property to be allocated in the overall R&D budget. A company must decide on a product-by-product basis which inventions are patent-worthy based upon the importance of the products, expected revenue stream, level of competition and degree of copying in the market.
The second part of an effective invention disclosure program is raising awareness of the value of innovation and its impact on the business. Third is making sure that inventors are recognized for their patent activity, either in a monetary or non-monetary way. Finally, a company needs an organized and efficient process for handling invention disclosures, for receiving them, and for evaluating them and making determinations on which ones to pursue as patent filings.
Editor: Are companies seeking to establish corporate cultures that encourage innovation? Are these efforts paying off?
Capraro: Definitely. As part of their initial patent program activity, companies ideally encourage innovation via a top-down effort from upper management to create a similar mindset among its employee-innovators, who will focus on innovation as part of their commitment to the company. With multiple levels of upper management committed to an innovation-based culture and with a few years of sustained activity, a company can change its culture to one that encourages innovation and acknowledges contributions to its patent portfolio.
Editor: Please talk about the causes of third-party patent claims and effective strategies to address them.
Capraro: There are a variety of third-party claims that come to an organization: (1) a claim raised by a competitor; (2) an offer where an entity is specifically offering a patent license for technology; and (3) a patent acquisition opportunity where a third party is offering to sell patents.
In dealing with these varied claims, certain best practices can be followed based on my experience with inside counsel. They include starting with a thorough internal investigation so that irrespective of the type of claim, there is a clear understanding of the company’s risk presented by the claim. The next step is internally vetting to determine how the company wants to resolve the issue. Here, I note that there’s usually no single solution, so setting priorities on different ways to resolve the issue is important. Budgeting for each of those solutions is the next step in the strategy. Last is having flexibility. The company must understand that as negotiations are carried out, issues change, risks change, exposure changes, and the company needs to be flexible in dealing with those changes.
Editor: Are companies using IP portfolios to their full advantage? How often should companies prune their patent portfolios?
Capraro: In my experience companies do use their portfolios to their full advantage, but what that means depends on the company. Not all companies use their portfolios to sue others; many use their portfolios for other reasons – defensive reasons, recognition of the value of their technology, internal recognition, licensing reasons – but whatever the reason, companies are spending a lot of time and money on developing and growing their patent portfolios. Whatever the company’s goal is for building a patent portfolio, companies with whom I work are feeling that they are meeting their goals as they develop and grow their portfolios.
With respect to pruning portfolios, there is no simple answer. Again, companies are spending a lot of money developing their patent portfolios. When the decision is made to discontinue properties within the portfolio, that effort – determining what to keep and what not to keep – is usually met with great angst and resistance simply because pruning certain aspects of a portfolio may prune its value.
Editor: What is the role of outside counsel in these processes? How can companies track attorney performance against business goals?
Capraro: The role of outside counsel depends on the company. Ideally, a company uses outside counsel in a way that makes the patent process more effective. Often companies will use outside counsel’s team to prosecute a large number of patent matters that the company’s legal department could not reasonably handle. Outside counsel may handle larger, more time-intensive patent matters such as reexaminations or oppositions. In short, outside counsel plays a vital role that is determined by the company on a project-by-project basis. In terms of tracking outside attorney performance, I am unaware of a specific statistically driven way that a company can track an attorney’s performance against goals. In my experience, companies track the performance of their outside counsel based on results. Results are easy to determine in some cases; one can count up the number of patents granted, the number of patent filings, and the number of third-party claims resolved on an annual basis. But those statistics usually are not the sole way that performance of outside counsel is measured. What is inextricably linked to all of that is the value of outside counsel’s advice and the role outside counsel plays in achieving results for the company.