CENSIS white paper: Intellectual Property in Business

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Intellectual Property in Business: IP basics, IP management, IP strategy IP Management during Growth (continued) 12 Time and money in IP Intellectual property management involves planning and managing two types of resources: time and money. It is undeniable that some IP rights can be very costly and time-consuming, and this deters some people from getting into registerable IP rights. So, it goes without saying that you must allocate financial resources for this exercise. Costs incurred can relate to preparation of applications, registration, maintenance, enforcing IP rights, and also staff training, hiring new staff members and consultants’ remuneration. The expenses associated with IP management can be substantial; thus, it is advisable to look at them as a long-term investment that offers your business new opportunities and facilitates access to external sources. 30 A company may consider seeking IP financing incentives, such as tax reliefs and relevant public funding to finance IP portfolio development. For example, the UK government offers Patent Box to reduce corporation tax on profits. 31 This offer is directed at companies that maintain and commercialise IP in the UK, allowing them to apply a lower rate of corporation tax to profits earned from their patented inventions. Likewise, R&D tax schemes 32 for SMEs and large companies are designed to boost innovation efforts and to bear at least a portion of the risk that such efforts may involve. Many countries offer patent boxes, and an overview of the schemes can be found at Tax Foundation, ‘Patent box regimes in Europe’ https://taxfoundation.org/ patent-box-regimes-europe-2021/ Time is required in the preparation phase for some registrable IP rights like patents, trade marks or designs. The preparation includes analyses of the state of the art, elaboration of claims, drawings and specifications. It will also take time to choose one or other form of IP protection as well as to conduct the market and business analyses on which IP decisions should be based. With the exception of patents, many registrable IP rights can be granted (registered) relatively quickly, i.e., within months. However, to enjoy protection from a granted patent, an application may take some years to progress through to grant. And in business, time is money. That waiting time during the long application process is filled with various actions required by the patent office, such as international filings, examination or publications. These activities generate further expense such as patent attorney or patent office fees. The waiting time can be partially offset by acceleration procedures and by a judicious filing strategy, but even with acceleration an application will be pending for several months as a minimum. Pending patent applications are still assets that can be licensed from the outset, but their value increases once the patents are granted (their monetisation becomes more feasible as well). Given the time it takes to secure a grant, I would advise companies to start early and then plan patent applications (as well as application for IP rights) well in advance of a product launch. 30 ISO Standard 56005:2020, Clause 4.6. 31 ‘Guidance Use the Patent Box to reduce your Corporation Tax on profits’ (HM Revenue & Customs, last updated 7 May 2020) accessed 27 July 2021, See also ‘UK patent box relief changes from 1 July 2021’ (BDO, 26 April 2021) accessed 2 December 2022 32 ‘Guidance Claiming Research and Development tax reliefs’ (HM Revenue & Customs, last updated 20 March 2020) accessed 2 December 2022 28
Intellectual Property in Business: IP basics, IP management, IP strategy IP Management during Growth (continued) 13 What to do with your IP When it comes to decisions relating to IP strategy, companies must answer one key question: whether to pursue a closed, open or semi-open strategy. John Palfrey gives an interesting perspective on the use of IP and divides the spectrum of uses into three categories: full exclusion (closed), limited exclusion (semi-open) and unlimited exclusion (open). Full exclusion You decide to exclude everyone else from using some or all of your intellectual property and exploit it yourself to the greatest extent allowable under law. This approach corresponds with a common understanding of intellectual property as ‘a sword and a shield. 33 In this model, a company actively asserts (enforces) IP rights against third parties. In many cases, the process begins with a ‘cease and desist’ letter sent to the party allegedly infringing the IP rights and ends with a licensing agreement (settlement) to allow the infringing party to continue the use of IP rights under specific conditions and for remuneration (licence fee, royalty). In this way, a company creates a revenue stream. However, the reaction of the third party may be less amicable and it may continue using the IP rights without authorisation. The party may run its own due diligence to assess the credibility of the infringement claims, as well as ignoring the letter and any other communication. This forces the company to consider legal steps, including a lawsuit. The less amicable approach of the third party may shift to a confrontational one, which will lead to a counterclaim and an attempt to invalidate the IP rights of the company. As Palfrey explains, this would be the shielding role of the IP. 34 Despite the obvious tension in such a scenario, it may end with a settlement agreement that would include a cross-licence. Palfrey indicates one strong limitation of this approach: it does not work against big technology breakthroughs and radically better solutions. He also states, ‘That particular battle has to be won in the research and development labs, not in the courtroom.’ 35 The lawsuit path is anything but easy (and cheap). In addition, diverse studies have revealed the risks relating to patent disputes and demonstrated that patent owners (plaintiffs) walk on thin ice: • Janicke and Ren in their research from 2005 found that about 25% of the analysed 262 dispositive cases 36 in 2002-2004 were won by the patent owner and the other 75% by the accused infringer. 37 • An analysis of 6,992 post-grant reviews at PTAB (USPTO) 38 of patents filed between 16 September 2012 and 8 June 2017 revealed rather shocking numbers: only 4% of petitions ended with all claims found patentable. A narrower analysis of 1,556 petitions that had reached final written decisions, demonstrated that 69% of petitions had all claims invalidated. 39 • A quarterly report of the PTAB from September 2020 revealed that out of 3,105 patents that had been subject to a PTAB Final Written Decision, 2,612 of them had been determined to be ‘Unpatentable/Cancelled’. 40 • Another interesting perspective was provided in a study by Henkel and Zischka, who concluded that around 80% of all active German patents are latently invalid, either fully or partially. 41 This data presents a real concern that should be included in the risk-benefit assessment before launching any patent enforcement campaign: a patent owner may not only lose the infringement dispute but also patents involved in litigation. Take-home message: Asserting your IP portfolio may be the only option to stop competitors from using or copying your solution and make them pay for the infringing use. However, the decision must be thoroughly analysed in consultation with your patent/ IP attorney before any actions are taken. 33 Palfrey (n 5) 101. 34 Ibid 102. 35 Ibid 104. 36 ‘A case in which, as it leaves the Federal Circuit, at least one claim of one patent is finally adjudicated to have been infringed and not invalid or unenforceable (i.e., a win for the patent owner), or in which it has been finally determined that no claim has these characteristics (a win for the accused infringer).’ Paul M. Janicke and LiLan Ren, ‘Who Wins Patent Infringement Cases?’ (34 AIPLA Quarterly Journal 1, 1, 2006) 4 accessed 2 December 2022. 37 Ibid 5. 38 Patent Trial and Appeal Board of the US Patent and Trademark Office. 39 Josh Malone, ‘Assessing PTAB Invalidity Rates’ (IP Watchgod, updated 24 June 2021) accessed 2 December 2022. 40 Ibid. 41 Joachim Henkel and Hans Zischka, ‘Why most patents are invalid – Extent, reasons, and potential remedies of patent invalidity’ (Draft, 24 March 2015), 3 accessed 2 December 2022. 29
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