Five Ways to Improve Your Company's Bottom Line Through Proactive Intellectual Property Management
In times like these, when a company's ability to contain spending can be the difference between survival and failure, no expenditure is safe from scrutiny. Intellectual property ("IP") expenditures are no exception.
Budgeting for IP, however, is complicated by the fact that IP is a long-term investment. Patents resulting from applications filed today can provide market exclusivity well into the late 2020s. Copyright protection can endure into the next century. Trademarks and trade secrets can last in perpetuity. Thus, any changes initiated today could have lasting effects for years and decades to come.
As a long-term investment, IP should be approached with a long-term outlook. Cuts should be carefully analyzed and strategically targeted. Additionally, fresh efforts should be made to exploit underutilized IP assets and prevent avoidable liabilities.
Five short- and long-term strategies for realizing cost savings and turning IP into a profit center are discussed below. In today's economic climate, thoughtful use of the right strategies can be the competitive advantage that allows one company to flourish while others flounder.
1. Strategically Prune Your Patent and Trademark Portfolios
Patent and trademark maintenance and renewal fees can consume a significant portion of a company's IP budget. Now is the perfect time to take a hard look at your company's patent and trademark portfolios and determine which patents and trademarks are important to the company's core business. Invariably, you will find that your portfolios include patents and trademarks for ideas and initiatives that either never gained traction or have since run their course. Ideally, some or all of these non-essential assets can be sold or licensed. Otherwise, simply allowing them to lapse will yield immediate savings in maintenance and renewal fees.
Owners of global brands can realize further savings by replacing multiple national trademark registrations with a single international registration under the Madrid Protocol. This can greatly simplify the renewal process and save money without losing the priority dates of the individual national registrations, if done correctly.
2. Reevaluate Licenses
If you license IP from someone else, then there is a good chance that you are paying royalties. There is no better time than now to reevaluate in-licenses and explore what, if anything, you can do to reduce or eliminate your royalty obligations. Thanks to two recent Supreme Court decisions -- MedImmune v. Genentech and KSR v. Teleflex -- patent licensees now have significantly more leverage over patent owners than they had only a few years ago.
As a result of MedImmune, licensees now may be able to challenge the validity of licensed patents in court without breaching or terminating their licenses and without risking an injunction or damages award. KSR, meanwhile, has made it easier to invalidate patents by showing that an invention is an obvious variation of things that had been done before.
If you are paying royalties for an invention that is of questionable patentability, MedImmune and KSR may provide a low-risk, high-reward path toward eliminating the need for the license, or at least obtaining more favorable terms through renegotiation.
3. Teach Your Employees IP Basics
One of the most effective ways to harvest creativity and avoid legal trouble is to educate your workforce about the basic forms of IP, how IP rights are protected, and why the IP rights of others must be respected. The investment, typically consisting of training and handbooks, is nominal, and the benefits are potentially great.
For example, IP savvy employees will be more likely to recognize when they have created IP and seek timely protection for it. They also will be better able to spot and report possible infringements of their company's IP, and will be less likely to infringe or misappropriate the IP of others.
The most effective training and handbooks are tailored to their audience and provide relatable examples of the role IP plays in each employee's day-to-day activities.
4. Police and Enforce
With increasingly cost-conscious consumers now ruling the marketplace, those overseas knock-offs that may have been a minor annoyance in booming times might now be a serious threat to your company's profitability. Now is the ideal time to identify and aggressively pursue infringers. Successful IP enforcement can lead directly to revenues in the form of damages or licensing royalties. It also can enhance profitability by restoring market exclusivity through a court-ordered injunction or an order from the International Trade Commission barring the importation of infringing goods into the United States.
While this police-and-enforce strategy may seem obvious in theory, it is surprisingly underutilized in practice. In part, this may be due to a disconnect between those familiar with the company's IP holdings and those who best know what is going on in the marketplace. This disconnect can be easily fixed by training an IP savvy workforce. Employees in sales and marketing, especially, should understand the extent of their company's IP portfolio so that they can better spot possible infringements at trade shows and in their daily interactions with existing and prospective customers.
The underutilization also may be attributable to a reluctance to litigate. To be sure, enforcing IP can be expensive and should never be undertaken lightly. The potential remedy -- whether damages, an injunction, or both -- will not always justify the costs and risks of filing a lawsuit. Such risks include, for example, challenges to the merits of your IP and a possible counterattack by your adversary charging infringement of its own IP.
Therefore, after identifying a suspected infringer, do your diligence before sending a cease-and-desist letter or filing a complaint. Demand from your lawyers an honest assessment of the merits of your case -- good and bad -- so that you can decide whether the potential reward justifies the costs and risks.
If you do decide to go forward, set a realistic goal at the outset, formulate a game plan for reaching that goal as quickly and efficiently as possible, and stick to that game plan. Do not let an overly litigious adversary (or worse, your own lawyers) drag you down paths that do little or nothing to advance your case.
5. Properly Mark Your Products
In order to maximize the amount of damages recoverable for patent and trademark infringement, companies should mark their products with notice of their patent and trademark rights. They should also require their licensees to do the same. For patents, the notice typically consists of the word "U.S. Patent" or the abbreviation "U.S. Pat." together with the patent number. For trademarks, the designation ® indicates that a mark is registered, while the designations TM and SM denote unregistered trademarks and service marks, respectively. Failure to mark can result in damages being limited to the period after the infringer received actual notice of the infringement.
Companies must be careful, however, not to mismark their products. False patent marking, which is mismarking done with the intention of deceiving the public, can result in a fine of up to $500 for "each offense," which some courts have interpreted to mean each falsely marked product.
This is not merely a theoretical threat either. There has been a recent surge in lawsuits filed by private individuals against companies for false patent marking. To avoid becoming a target, companies should regularly review how they mark their products and remove patents that are no longer in force, since these are the easiest targets for lawsuits. Companies also would be well advised to obtain a written opinion from patent counsel explaining why the products are properly marked, in order to stave off a finding of deceptive intent if they are ever sued for false marking.
The aforementioned strategies are just a few examples of ways that proactive IP management can help companies weather and even thrive in these challenging market conditions. Forward-thinking companies that embrace these strategies will obtain the greatest returns on their IP investments and position themselves for short- and long-term success.