Making Patent Committees Proactive

Thursday, June 1, 2006 - 01:00

Investors expect them. The chief technology officer may insist on one. But companies with patent committees too often seem like your parents with a brand-new iPod: they know they're supposed to have the thing, but aren't necessarily sure what to do with it or how it works.

Patent committees are important for start-ups defining their intellectual property (IP) strategies, growing companies with proliferating patent portfolios, and mature businesses managing diverse IP across multiple lines of business - in other words, for just about every serious technology company. The reason is that different tasks and decisions call for different skills. Every IP choice carries srategic, financial and resource implications that are best considered from more than one perspective. The right people can ensure targeted development of an IP portfolio that will inflict pain on competitors and, if desired, promote licensing opportunities. And corporate counsel should play a critical role.

The basic problem with patent committees is that they are well, committees. It's all too easy to elevate process over results, and periodic meetings, rather than engaging attentions and stimulating dialogue, can turn into mechanical rubber-stamping exercises. How can corporate counsel help their companies avoid this all-too-common scenario and make the patent committee proactive? By maintaining a clear sense of mission, by involving the right people and keeping them involved, and by avoiding some common pitfalls we'll discuss.

In a nutshell, the patent committee's job is to oversee IP development - establishing procedures for scientists and engineers to follow in recording and reporting innovation, and ensuring that resources (money and, usually even more precious, the time and attentions of technical personnel) are well directed. Patents and pending applications, particularly outside the United States, cost money every day they remain alive. Ruthless pruning is necessary when the technology they cover is superseded, or if, despite all efforts, the coverage offered by the patent office falls below what's minimally acceptable. Similarly, in deciding which inventions to patent, the committee must avoid automatic deference to the chief technology officer. She's doing her best, but may confuse what's technically intriguing with protection that advances the business. Or she may sympathize with inventors eager to see their names on a patent. Remember: if IP will not inflict pain or elicit licensing offers, it isn't carrying its weight.

It's therefore essential to have all key constituencies - technical, marketing, and upper management - represented and active on the patent committee. Setting and executing on IP policy is a business function, not a technical one. A patent committee succeeds only when its members take an active role - involving themselves, to some extent, with every issue and patent. Outside lawyers may also participate, depending on the complexity of the IP portfolio. And some lucky soul must be saddled with responsibility for the administrative side of the process: working with lawyers, cajoling cooperation from inventors, implementing committee directives. Regular meetings on a quarterly basis allow the company to review its strategy and approve major expenditures with all viewpoints considered.

Naturally, and despite pleas from the general counsel, busy managers will not enthuse over meetings mired in minutiae. And that's precisely the first pitfall to avoid. Focus the agenda around strategy issues rather than details. Not by ignoring the bread-and-butter decisions that set an IP portfolio's size and geographic scope. But place the issues into a broader business context - licensing offers and standard-setting opportunities, industry trends and the competition's latest products, infringement threats and brewing lawsuits. No IP question lacks a strategic dimension. Holding the forest in view when debating the myriad trees not only keeps eyes open (and meeting attendance consistent), but ensures that decisions are based on business rather than technical priorities.

Maintain a status list of patents and applications, as well as recent invention disclosures received by the patent administrator, and define both a business category and a strategic objective for every IP item on the list. Unless a patent's purpose is tactical, e.g., setting up a roadblock for competitors or establishing an early priority date for new technology, it should be associated with a specific company product or at least a line of business - whether on sale or under development. For every approaching deadline or action item, measure expense and effort against likely return. Does the rationale for this patent or that application remain compelling? IP covering phased-out products may best be consigned to history's ashheap, but perhaps new strategic value can be identified - e.g., coverage of a competitor's product or the potential for licensing. Such possibilities often lie most squarely in the sights of the marketing folks, which is why their participation is so critical.

At the same time, don't let the status list become the meeting's agenda. A firm's inventory of patents and filed applications, and even new invention disclosures, in some sense represent past innovation. They are what the company has already thought of. Which brings us to the second pitfall to avoid: don't shortchange the future in favor of the past. It's all well and good to prune and shape the existing patent portfolio. But new seeds must be planted. Where are competitors headed with their technology? Can barriers to entry be constructed using IP? Such expedients may not be terribly interesting from a technical perspective, causing the CTO to turn up her nose, but can provide a strong market advantage. Suppose, for example, your company sells fancy software that hooks into a customer's database and legacy applications. Achieving that interoperability may have been pure drudgery as far as the engineers are concerned; what they care about is the fancy capabilities. But if competitive software must also play nicely with existing infrastructure, and the engineers' boring solution is actually the best way of making this happen, patenting it could make life very difficult for would-be marketplace entrants - even if their software has fancier capabilities than yours!

What about complementary products or future convergence with as-yet-unrelated technology? Usually the emergence of compatible offerings enhances sales of the original product, and perhaps the originator is just as happy to leave development of those products to others. Still, without solid IP protection over how compatibility is achieved, the originator will lose control of the gate - and, potentially, its product's place in the sun as alternatives emerge. Patenting the gate can prevent (or at least retard) commoditization as competitors probe for weaknesses in the core IP and explore workarounds. If your parents want to load music onto that iPod, for example, they'll have to buy it from Apple Computer's iTunes store.

Similarly, the forces of convergence can make today's supplier or customer tomorrow's competitor. The patent committee must keep its collective eye on the future and spot opportunities for convergence before they occur. It's often possible to forecast roughly how disparate systems might work together, or the likely modifications necessary to permit operation in a new environment. Start the IP process early! Rarely is it essential to wait for a working solution or prototype. Low-cost "provisional" patent applications allow companies to stake out a one-year foothold on ideas that may not stand the test of time. Call them conjectural IP positions: if the technology develops in a different direction, provisionals can be abandoned without financial remorse.

This proactive mindset is particularly important for pure research companies that make a living by licensing their IP. They most of all must stay at least a step ahead of their licensees, who are also, potentially, competitors.

The final pitfall is a tendency to do things the way they've been done, particularly if the results have been successful. Think outside the box. In the United States, so-called "business method" patents can cover a wide range of subject matter, from marketing to the way relationships are maintained to how products are sold or delivered; think Amazon.com's "one-click" patent. To be sure, there are hurdles - some wacky patents of this ilk have embarrassed the Patent Office, which reacted by raising the bar and now subjects such applications to enhanced scrutiny. Moreover, many patentable methods fail the "infliction of pain" test: competitors will simply do business in a different way. But wise patent committees consider the possibilities.

If your company sells machines or computers, make sure your patent lawyer doesn't limit coverage to machines or computers; patent claims to methods may seem out of place, but in fact, these free a product's theory of operation from a particular ensemble of component parts, creating broader coverage. Conversely, new processes should also be claimed in terms of machines and software for implementing them. Why? Because process patents often are infringed not by competitors, but by their - and potentially your - customers. Certainly the competitor may bear indirect responsibility for its customers' infringements, but that's tougher to prove. The software or hardware that the competitor sells can be covered directly (and prospective customers left out of lawsuits).

Patent-committee meetings will never compete with American Idol for audience engagement. But handled correctly, with informed guidance from corporate counsel, they can promote the critical self-examination and dialogue that makes IP into marketplace weapons rather than expensive wallpaper.

Steven J. Frank is a Partner in the law firm of Goodwin Procter LLP. His latest book, Intellectual Property for Managers and Investors, was recently released by Cambridge University Press.

Please email the author at sfrank@goodwinprocter.com with questions about this article.