Patent Strategies For Small High-Technology Companies

Patent Strategies For Patent Strategies For SmallSmall

High-Technology High-Technology CompaniesCompanies

Are you changing?

ByByDavid M. O’DellDavid M. O’DellODellD@haynesboone.comODellD@haynesboone.com214.651.5262214.651.5262

1.1. Why IP is ImportantWhy IP is Important

2.2. What is a Patent?What is a Patent?

3.3. Patent StrategiesPatent Strategies

4.4. Stories and ExamplesStories and Examples

Intellectual Property Law Intellectual Property Law

Intellectual Property Intellectual Property Core Corporate AssetsCore Corporate Assets

Intellectual Property Intellectual Property Core Corporate AssetsCore Corporate Assets

"In 1982... hard assets accounted for "In 1982... hard assets accounted for 62% of [a] company's market value; 62% of [a] company's market value; ten years later they made up only ten years later they made up only 38%. And these were the 38%. And these were the industrial's."industrial's."

Fortune, October 2, 1995Fortune, October 2, 1995

"In 1982... hard assets accounted for "In 1982... hard assets accounted for 62% of [a] company's market value; 62% of [a] company's market value; ten years later they made up only ten years later they made up only 38%. And these were the 38%. And these were the industrial's."industrial's."

Fortune, October 2, 1995Fortune, October 2, 1995

Uses of PatentsUses of Patents

• Create Barrier To Stop Create Barrier To Stop CompetitorCompetitor

– Priceline.com’s suit against Priceline.com’s suit against ExpediaExpedia

• Generate Licensing IncomeGenerate Licensing Income

– Priceline.com’s $1.5MM License Priceline.com’s $1.5MM License to Alliance Mortgageto Alliance Mortgage

• Defensive Cross-LicensingDefensive Cross-Licensing

1.1. Why IP is ImportantWhy IP is Important

2.2. What is a Patent?What is a Patent?

3.3. Patent StrategiesPatent Strategies

4.4. Stories and ExamplesStories and Examples

Intellectual Property Law Intellectual Property Law

What is a Patent?What is a Patent?

• Right to Exclude Others Right to Exclude Others • A Bargain Struck with GovernmentA Bargain Struck with Government• Claims Define the Right - “Metes and Claims Define the Right - “Metes and

Bounds”Bounds”• Competitors Have Right to Design Competitors Have Right to Design

AroundAround• Last for about 17 yearsLast for about 17 years

Invention Must Be Invention Must Be New and Non-Obvious New and Non-Obvious

• Not Patentable if Differences Between Not Patentable if Differences Between Prior Art and Invention Are “Obvious”Prior Art and Invention Are “Obvious”

• Easy to Show Non-ObviousnessEasy to Show Non-Obviousness– ““Person of Ordinary Skill” StandardPerson of Ordinary Skill” Standard– ““Manner of Making” Not a NegativeManner of Making” Not a Negative– ““Commercial Success” Supports Commercial Success” Supports

Non-ObviousnessNon-Obviousness

Level of ObviousnessLevel of Obviousness

0

50

100

Pioneering Crowded

Technology Saturation

Leve

l of O

bvio

usne

ss

Patentability of Telecom Ideas

Today

Examples of Patentable Examples of Patentable Subject MatterSubject Matter

• SoftwareSoftware• Signalling MethodsSignalling Methods• Business Methods (Telecom Services)Business Methods (Telecom Services)

• You You CannotCannot Patent Patent – Laws of Nature or Laws of Nature or – Abstract IdeasAbstract Ideas

0

5000

10000

15000

20000

250001990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Patents Issued

Software Patents IssuedSoftware Patents Issuedby PTOby PTO

Signalling MethodsSignalling Methods

System for Controlling Usage

of Phone Debit Cards

Telecom ServicesTelecom Services

1.1. Why IP is importantWhy IP is important

2.2. What is a Patent?What is a Patent?

3.3. Patent StrategiesPatent Strategies

4.4. Stories and ExamplesStories and Examples

Intellectual Property Law Intellectual Property Law

Need For IP StrategyNeed For IP StrategyNeed For IP StrategyNeed For IP Strategy

””If small entrepreneurs want to If small entrepreneurs want to protect themselves, they better protect themselves, they better

get into the game.”get into the game.”Q. Todd DickinsonQ. Todd Dickinson

Acting Commissioner of PatentsActing Commissioner of Patents

””If small entrepreneurs want to If small entrepreneurs want to protect themselves, they better protect themselves, they better

get into the game.”get into the game.”Q. Todd DickinsonQ. Todd Dickinson

Acting Commissioner of PatentsActing Commissioner of Patents

Reasons for Building a Patent Reasons for Building a Patent PortfolioPortfolio

Attract Venture CapitalAttract Venture Capital Preserve Market ExclusivityPreserve Market Exclusivity Generate RevenueGenerate Revenue Defense Against CompetitorsDefense Against Competitors Increase Market CapitalizationIncrease Market Capitalization Generate PublicityGenerate Publicity

Right-to-Use and Clearance Right-to-Use and Clearance SearchesSearches

Check for any patents that will Check for any patents that will prevent you from entering the prevent you from entering the market placemarket place

Identify patent strategies of Identify patent strategies of competitorscompetitors

Identify design-around requirementsIdentify design-around requirements

1.1. Why IP is importantWhy IP is important

2.2. What is a Patent?What is a Patent?

3.3. Patent STrategiesPatent STrategies

4.4. Stories and ExamplesStories and Examples

Intellectual Property Law Intellectual Property Law

The Computer Wars The Computer Wars

Austin Computers

Compaq

Dell

Patent Patent

The Computer Wars The Computer Wars

Austin Computers

Compaq

Dell

Lessons LearnedLessons Learned

• The strategy of “we can do the same The strategy of “we can do the same thing, only cheaper” does not usually thing, only cheaper” does not usually work in a competitive environmentwork in a competitive environment

• Building a strong patent portfolio of Building a strong patent portfolio of your own enables cross-licensingyour own enables cross-licensing

• Strategic partners also enable you to Strategic partners also enable you to cross-licensecross-license

Centillion Data Systems Centillion Data Systems

Centillion

SprintAT&T

Patent

Centillion Data Systems Centillion Data Systems

Centillion

SprintAT&T

Lessons LearnedLessons Learned

• Developing a niche idea or an Developing a niche idea or an adjunct-type system can often be adjunct-type system can often be successful successful

• Acceptance and licensing by industry Acceptance and licensing by industry leaders (or by the general public) leaders (or by the general public) also serve to further validate your also serve to further validate your patentpatent

Stacker & Stacker & Windows Disk DoublerWindows Disk Doubler

Stac

Microsoft

Patent

Stacker 4.0 & Stacker 4.0 & Windows Disk DoublerWindows Disk Doubler

Stacker

Microsoft

Lessons LearnedLessons Learned

• Patents protect from encroachmentPatents protect from encroachment• Limiting your business to your Limiting your business to your

invention protects against cross-invention protects against cross-claimsclaims

Ball Semiconductor Ball Semiconductor

Patent Patent Patent Patent Patent

Lessons LearnedLessons Learned

• If you are entering a new, pioneering If you are entering a new, pioneering technology, a broad-reaching patent technology, a broad-reaching patent strategy adds value to your companystrategy adds value to your company– Modern example, nano technologiesModern example, nano technologies

Each of these companies Each of these companies announced an issued announced an issued patent and saw there patent and saw there stock take an immediate stock take an immediate jump.jump.

Tivo, Replay, & Tivo, Replay, & Amazon.com Amazon.com

Lessons LearnedLessons Learned

• Patents are valuable to investorsPatents are valuable to investors

ConclusionConclusion

• Big players typically have a strong Big players typically have a strong patent portfoliopatent portfolio

• Licensing and joint-venture can Licensing and joint-venture can provide some level of patent provide some level of patent protectionprotection

• Start patent process soonStart patent process soon• Even if Company fails, patents can Even if Company fails, patents can

still be a source of revenuestill be a source of revenue

Patent Strategies For Patent Strategies For SmallSmall

High-Technology High-Technology CompaniesCompanies

Are you changing?

ByByDavid M. O’DellDavid M. O’DellODellD@haynesboone.comODellD@haynesboone.com214.651.5262214.651.5262