ARCHIVE:

PERCEPTION PARTNERS SPONSORS FIRST ANNUAL CORPORATE IP INSTITUTE
Published October, 2007

PERCEPTION PARTNERS ANNOUNCES 2007 SPEAKING SCHEDULE
Published January, 2007

PERCEPTION PARTNERS PREDICTS PIVOTAL VERDICT 
IN KINETIC CONCEPTS VS. BLUESKY
Published August, 2006

PERCEPTION PARTNERS FOUNDER DISCUSSES BRAND LICENSING
Published May, 2006

INTELLECTUAL PROPERTY SURVIVES HURRICANE KATRINA
Published September, 2005


PERCEPTION PARTNERS DONATES SERVICES ON WORLD IP DAY 2005
Published April, 2005

KEEPING TABS ON COKE
Published January, 2005

CUSTODIAN OF WORLD'S MOST VALUABLE IP PORTFOLIO JOINS PERCEPTION PARTNERS
Published October, 2004

GOOGLE - IP IS MORE THAN TWO-THIRDS OF IPO
Published May, 2004

IS YOUR BUSINESS METHOD PATENT PENDING?
Published January, 2004

IS YOUR BUSINESS METHOD PATENT PENDING?
Published January, 2004 at www.techlinks.net

Intellectual property (IP) value protection has primarily been the domain of legal professionals who file and prosecute patents for defensive purposes. However, protection is only one critical consideration for today’s entrepreneurs and managers. Also important are IP value creation and value extraction, as developed through strategic, technological and financial planning (taking calculated risk) that is distinctly not legal (risk averse) in nature.

If undiscovered, IP that is granted in your business area or around your business methods can prevent the exploitation of opportunities or development of products that may have taken years to create. This can have profound effects on the nature of competition; it is therefore in the best interest of managers to become familiar with the opportunities and threats that this situation presents and to develop strategic options to deal with it. The key source available in which to review potential IP “time bombs” is the online database of pending patent applications published by the United States Patent and Trademark Office (USPTO). This database stands in contrast to the well-known database of granted patents, also available from the USPTO.


U.S. Patent Applications Available for Review

The U.S. Patent Application Database (called AppFT – for Application Full Text) came into existence as a result of the eighteen-month publication (from the earliest priority date) provisions of the American Inventors Protection Act of 1999. As a result, the USPTO publishes pending patent applications, other than design, reissue or provisional applications on Thursday of each week. The USPTO published the first group of applications on March 15, 2001.

Patent applicants may make a request for non-publication, but it must be made at the time of filing and be conspicuous within the body of the application. A request for non-publication must be based on an expressed intent not to file any foreign patent applications. This may be interpreted as a sign that there are no foreign markets for the technology, or that the patent applicant is not capitalized enough to be able to afford those much higher expenses, or that they may have no interest in foreign filings – all worthwhile strategic considerations.

The AppFT database, and the pending patents it discloses, provides a glimpse of tomorrow’s technology trends as well as a rich source of competitive intelligence for those who know how to search it. While many of these applications will never become issued U.S. patents, 2001 statistics published by the USPTO indicate that 51% of utility patent applications were granted (worth considering since there will be an estimated 222,270 patent applications published in 2003). These disclosures deserve attention from prudent entrepreneurs and managers as they develop the strategies behind their own business activities.


Business Method Patents are Worth Investigating

One of the more important reasons to search AppFT is for pending business method patents (BMPs). These patents have been given significant attention in the press, due to their potentially broad implications and restrictions on competition. Perhaps the most famous BMP belongs to Amazon’s “one click” method. This patent empowered Amazon to seek an injunction against Barnes & Noble.com (B&N) and forced B&N to adopt a more cumbersome online ordering system. While B&N was able to overturn the injunction and begin subsequent litigation against the validity of Amazon’s patent, the companies eventually settled out of court. Although terms were unpublished, it is understood that Amazon collects royalties from B&N, as well as from others against which they assert this patent.

Other BMPs can alter the relationship between a David and a Goliath. The recent Netflix (NFLX) patent may provide the best example. The Netflix DVD rental service, introduced in 1999, has more than 1 million subscribers, and about $236 million in revenues for the four quarters ended September 2003.

Netflix subscribers are allowed to rent DVDs and create an online list of movies that they would like to see. After watching a movie, customers return it in a pre-paid envelope; the company then sends them the next DVD in their rental list. There are no late fees and customers may hold on to a maximum of three DVDs for as long as they like. This business method has produced measurable success for Netflix, as well as competitive announcements from both Wal-Mart and Blockbuster.

Netflix was granted a broad patent in 2003 that covered many of the basic features of the company's business model. The impact of the patent presents a threat to entrants and a financial opportunity for Netflix. There are now only a few strategic options for competitors – each with its own price tag: License the patent (unlikely, due to the growing market that Netflix can dominate); innovate around it (time consuming and expensive); buy the patent (and most likely, the company); challenge the patent in court (three or four years after appeals); or exit the business altogether.

It may have been smarter for such well-funded entities as Wal-Mart to negotiate a deal prior to proclaiming their intentions publicly. It is possible that they were unaware of the Netflix patent, as it was filed in 2000, prior to when the application publication rules came into play. What is more likely is that these competitors discounted the chances of patent grant, or felt that they could challenge it successfully. However, many enterprises choosing to enter new markets lack the resources of such large companies, and may fare better when pursuing alternative options with those who have filed significant BMPs.


IP Strategies for Managers

Potentially expensive problems for new market entrants, such as those described above, may be discovered or anticipated using knowledge gained from AppFT. A skilled researcher using this database can identify critical intelligence to assist in business planning, formulate competitive and entry strategies and determine the timing of such activities. Action depends on several factors. Most important will be the perceived likelihood of patent grant. However, other factors will also guide decision-making, such as financial resources (yours and that of the inventor), the ability of the filer to withstand a legal challenge (in the event of patent grant) and any prior art in the field (earlier embodiments of the described invention) that may render that patent invalid, even if granted.


If You Think the Patent Will Be Granted

By examining patent applications (using dates, keywords, classifications, citation references and other inherent characteristics), one can identify potential trends. Spotting patterns early – such as heavy patenting in a financial services area, or surrounding a particular chip-manufacturing process – can aid in the identification of potential strategic partners. In addition, if it seems likely that patents will issue for the business method in question, then strategic options must change.

If there are those who filed to protect a business method that you wish to practice, it may be better to find them now than encounter a licensing or legal challenge later. In addition, proactively identifying partners in advance of any patent grant may create a friendlier spirit if a need for negotiation arises.

Negotiation is a typical reason for pre-grant identification of BMP filers. It may be possible to purchase an option, so if that patent is granted, an early buy-in could permit exclusivity in specific fields of use. Acquiring rights prior to an actual patent could also allow for favorable treatment on the royalty structures, renewals and even the audit rights that may be found in a typical license agreement. If a patent recipient has to assert their rights to get paid instead of receiving up-front compensation, terms will most likely be less favorable to the licensee.

In contrast, there may be no opportunity to negotiate the rights to certain pending patents, due to the strategies of the inventors or assignees. Knowing this sooner, rather than later, is also important. A pending patent, squarely in your business space, may present immediate problems, such as limiting the ability to raise funds (threatening patent applications rarely escape notice from funding partners conducting due diligence). It may also necessitate additional R&D investment to identify an alternate solution. These issues should be factored in to any capital budgeting and forecasting activities.


If You Think The Patent Will Not Be Granted

Most managers want to believe that competitive BMPs will not be granted or considered valid. Once discovered, an application of note should be read in full, and its viability should be discussed with a qualified patent attorney and those skilled in the art. It is possible that a pending patent may have a priority filing date after some known prior art. This provides leverage in formulating business strategy – one can be comfortable that even if the patent issues, there is a strong chance of invalidation in a legal challenge.

Another “rough” way to assess the chances of a patent grant is to correlate the number of applications in a technology or business area to the number of actual grants in same patent classes. If there is a high volume of applications vs. a low number of recent grants, then there may be a higher likelihood that the patent will not issue.
However, acting as if a patent will not be granted is a tricky situation. Ignoring IP is a weak strategy and can come back to haunt decision-makers who fail to consider all options. In addition, a more proactive competitor may obtain coveted rights first.

What if a business method is new, and it has not yet been patented? Perhaps now is the time to disclose it in a patent application. This is another way in which AppFT can provide valuable information. Once it has been determined that no patent exists, a BMP application creates a signal to others (albeit up to eighteen months hence), and can be used in order to draw out an offer or deal. Further, as practice in a specific business area increases, AppFT can be used to identify potential inventors in the space, and they may be solicited for employment.

In short, the USPTO AppFT database is here to stay. If mined with skill, it presents an enormous amount of intelligence on the people, companies and innovations that will generate measurable returns in the future. If an enterprise wishes to create and extract value from its IP and that of its competitors, then leveraging this data – and the inherent strategic options presented – is essential.