Patent power (part 2 of 2)

To unleash the power of patents requires aligning your patent strategy with your core business objectives.  It requires recognizing the opportunity and executing it strategically.  That may sound like common sense, but that doesn’t mean that everyone does it. 

Take for example, the company that patented every patentable invention they developed.  Patents were trophies.  That’s how far the analysis went.  As a result, the company found itself with a patent portfolio of marginal strategic use.  They recognized the opportunity and executed, but they did so willy-nilly.

Changes to the competitive landscape, however, caused the company to change its thinking.  Regulatory requirement forced the engineers to collaborate more frequently with outside vendors to satisfy emerging technical needs.  Competitors were aggressively patenting innovations that the company and others in the industry needed if they wanted to stay competitive.  When the company suddenly realized that it might end up paying royalties to competitors, the desire to develop its own inventions and be in the driver’s seat on patent rights developed a new sense of urgency.  They started to apply for patents in a manner more closely aligned with protecting their product and manufacturing processes, unlike Malden Mills.

IBM came to that realization its patent portfolio could do more than serve as a moat around their core technologies in the early l1990s.  They realized it was an underutilized asset that could also generate revenue in its own right and began aggressively mining their portfolio for licensing opportunities and within a decade began generating more than a billion dollars in annual royalty revenue.  Those are impressive returns when you stop to realize that much of the revenue from the licenses came from competitors.

They may have inadvertently reached that conclusion about the value of riding coattails on competitors’ sales as a result of patent infringement litigation in the 1980s against Japanese and Korean rivals.  Both IBM and Texas Instruments won a number of landmark cases that led to a string of license agreements t generating significant amounts of revenue.

Their Asian counter parts learned from their experiences in the school of hard knocks and were determined to be in the licensor instead of the licensee in the future.  In the decades that followed, they were not only successful in developing break through technologies, they were also very successful patent initiatives, but have engaged in extensive cross licensing within the electronics industry.  Today, for example, the average flat-screen television contains memory, image-processing chips and other technologies from multiple companies.  Their growing sophistication and willingness to engage in tough negotiation and even litigation, has taken the power of patents to a new level. 

What are you doing to unleash the power of patents in your organization?  How can patents be used as a tool for maintaining the sustainability of your business?