Patent Strategy: A Manufacturer's Secret Weapon to Boost Profitability

Resources are limited, and getting the most value out of patent protection means using a patent budget efficiently. One way to achieve this is by employing the 80/20 rule—80% of revenue may be generated by only 20% of products/services—to analyze whether resources are targeting the most commercially valuable assets.

This method uncovers inefficiencies in pursuing or maintaining intellectual property associated with less-profitable products/services.

Reviewing protection in this way also helps identify problem areas, such as the need for additional protection if competitors are not adequately blocked from a company’s primary revenue lines. And trends may show that competitors are increasing filings in specific technology areas or geographies, which could pose problems in the future if not addressed. Reviewing the business strategy of patents apart from technology strategy helps deploy the patent budget most effectively.

Avoid Tunnel Vision: Look Beyond One’s Own Products

A product launch is often the catalyst for seeking patent protection. It is understandable to want to protect an investment in R&D; however, focusing on one’s own product can cause tunnel vision.

A common misconception is that a patent gives the right to practice the patented product, when it only grants the right to exclude others. So even if one’s product is patented, it may still infringe on the patent rights of another. Perhaps more importantly, it may not sufficiently block competitors from associated revenue.

Competitors may be watching published patent applications and enter the market after trying to design around published patent claims.

In addition, markets and technologies change over the course of a 20-year patent term. What may not be a preferred embodiment now may be in 10 or 15 years, since consumer tastes, manufacturing processes and materials all change. To thwart competition, one should look to protect various ways of employing technology, including how competitors will design their own products now and in the future. Good patent protection provides a moat around the business—not just a product. The wider and deeper the moat, the better protection.

Review Protection for Most Profitable Products (Assemblies or Parts)

The review process entails tying profitable products to patent protection. This may already have been done, and the information may be available on a virtual patent marking webpage. If not, the exercise is even more useful because the information can be used to create a patent marking webpage, thus preserving the right to damages for patent infringement.

When identifying the most profitable products, it is important to consider assemblies and their constituent parts. Things like replaceable wear items may be more profitable than the machines in which they are used.

Next, analyze the protection for the most profitable products. Unprotected products invite copying, allowing competitors to improperly benefit from the research and development investment in those products. If products do have protection, assess if competitors can design around the patent claims. Holes should be filled with additional patent claims.

Also consider alternatives to patent protection. As an example, a wear item may have been used in the market for years and utility patent protection may have expired, but by changing the aesthetic design, it may be possible to protect it with a design patent, copyright and even trade dress protection. If a product is profitable, it is worth kicking the tires on alternative forms of IP protection.

Review Filing Trends for Companies, Technologies and Geographies

Patent filing trends can be an invaluable source of perspective, as they can be used to diagnose both internal and external threats. A decline in a company’s own filings may indicate a lack of innovation. It may also indicate a problem with process, resources or company culture. Increases in filings by a competitor, meanwhile, may indicate the the a company is falling behind in a particular space.

Once a company determines its most profitable business segments, those segments can be tied to specific patent classifications—and trends in those classifications identified. Patents are organized into technology groupings based on subject matter. The most prevalent classification system is the Cooperative Patent Classification (CPC), used by the U.S. Patent Office, the European Patent Office and many countries throughout the world.

Companies can also analyze patent trends by country, to determine whether competitors are gaining ground or expanding in unexpected places for future revenue streams. The objective is not just to assure that a company has enough protection to block competitors in specific technologies and/or geographies, but to detect trends so the company can act before it is too late.

The most profitable products and technologies, as well as innovations that are particularly profitable in a certain geographic area, may deserve more protection. Moreover, by identifying patent trends, companies may identify new opportunities, such as technology or geographic areas where a competitor failed to obtain protection and is vulnerable.

Patent budgets should create value. If there is a drive to cut costs, the current strategy is not working. Instead, focus on high quality IP in strategic areas, creating a web of protection in those areas while abandoning others.