Risk Management for Innovative Tech Companies and Patent Portfolio Managers

 For innovative tech companies, developing a successful patent portfolio is mission critical. But it’s not easy because the patent process is notoriously complex and expensive.

In other words, the patent process is fraught with risks that can have a significant impact on the overall value and success of a tech company.

The most basic risk in the patent process is the risk of doing nothing. Speed and timeliness are critical components of a successful patent program. But for active patent programs that are up and running, it’s useful to have a more sophisticated understanding of risks in the patent process, so that those risks can be managed in a smart and efficient way.  

In the patent process, we can broadly think of patent risks as uncertain circumstances or events that, if they occur, would damage the value of the patent. In their seminal book Edison in the Boardroom, Susan S. Harrison and Patrick H. Sullivan describe three categories of patent risks:

• Innovation risks: The inherent uncertainty of bringing any new product or service to market

• Environmental patent risks: The ever-present reality that third parties (governments, competitors, etc.) might change the patent system or the relevant technical industry

• Intrinsic patent risks: Risks that are associated with the patent itself and intrinsic to the patent process

The “intrinsic” patent risks are the ones that a tech company can actively manage, which is why in this blog post, I’ll be expanding on the idea of “intrinsic” patent risks, as well as how you can minimize those risks.

In particular, we’ll take a look at four factors that contribute to intrinsic patent risks: validity, enforceability, scope, and design-around. Virtually every patent is susceptible to all these risks, at least to some degree.

Let’s take a closer look at each.

Validity Risk

“Validity risk”: There’s always a risk that your issued patent could be held invalid, which effectively nullifies your patent rights. An invalid patent is one that the patent office should not have granted in the first place.

The main way that a patent can be invalidated is through prior art, which can be used to show that the invention was known (lacks “novelty”) or easily derivable (“obvious”) from the state of the art.

There are, of course, other ways that a patent can be found invalid, but for brevity, here I’ll focus on prior art.

How To Minimize Validity Risk

Sometimes the most relevant prior art emerges only after a patent is granted, which creates a degree of uncertainty during the patent process. To reduce the chances of encountering prior art obstacles, use the following tactics:

• Pre-filing searches and vetting: Be aware of the prior art to the extent possible, and draft claims that avoid the known prior art. This can be accomplished by actively searching for, and critically analyzing, the closest prior art before filing patent applications.
• File your PCT with a foreign ISA: If you file a US application and a PCT application to preserve foreign rights, you can get multiple patent offices to search for prior art early in the prosecution process on by choosing a foreign International Searching Authority. For example, if you use the Korean Intellectual Property Office as the ISA, they will often search documents written using Asian languages, which a U.S. examiner wouldn’t do.
• Monitor for late-surfacing prior art: Sometimes, prior art will become public only after you’ve filed, and so it would be impossible for you to find them in a pre-filing search. This is because patent applications only become public 18 months after they’re filed. For this reason, you should do updated searches several months (e.g., 12, 18, or 24 months) after filing your patent application.
• Strong dependent claims: Narrower claims are less likely to be invalidated, and dependent claims don’t limit the scope of the patent as a whole. In other words, narrow dependent claims can be robust to prior art without giving up the broader patent scope afforded by the independent claims.
• File continuations: After filing an original patent application, you can file a follow-on application with an amended claim set to obtain a more diverse claim scope. For example, you might want to file broader or narrower claims in the continuation.
• Cross-cite all art: Let the patent office know about relevant prior art up front, and continue to let the patent office know of newly-discovered prior art while the application is pending. This ensures that the closest prior art is considered when examining your application — and can’t be used to undermine your patent later on.
• Review by “blue team”: Have an internal group within your company play devil’s advocate, and incentivize them to find prior art that would invalidate an application early in the process.

Enforceability Risk

“Enforceability risk”: there’s also a risk that your issued patent cannot be enforced (even if the patent is valid and was properly granted). An unenforceable patent is one that effectively has not teeth because it cannot be asserted in court.

Certain types of critical mistakes in the patent process can cause a patent to become unenforceable. The two most common are:

1. “Unclean hands” doctrine: You can’t enforce a patent that was obtained by fraud or dishonesty.
2. Lack of ownership: You can’t enforce a patent that you don’t own.

How to Minimize Enforceability Risk

Sometimes an honest mistake or oversight during the patent process can provide a basis for your competitors to challenge the enforceability of your patent. For example, if an inventor doesn’t cite an important prior art reference during the patent process, in retrospect it might look like a deceitful act even if it was an honest mistake. As another example, many companies forget to properly document ownership of their patents until it’s too late.

The following measures can help you avoid running into these types of issues:

• Establish patent assignment procedures: Make sure your company really owns the patent rights, free and clear of any inventors or third parties. This can usually be accomplished through well-crafted employment terms, contractor agreements and patent assignments.
• Establish cross-citing procedures: Failing to comply with the USPTO’s Duty of Disclosure can render your patent unenforceable, so set up systems (for example, by thoroughly documenting your inventions) to ensure you’ve cited all references that you discover through related copending applications.
• Monitor filing deadlines: Make sure to file for patent protection before you pursue any plans to publicly disclose your invention! If you publicly disclose, use or sell your invention more than a year before your patent application is filed, your own actions could render the patent invalid or unenforceable.
• Use NDAs with robust protections: Sometimes, you can’t avoid discussing your IP with third parties — for example, in discussions with investors, potential hires, etc. Have all third parties sign an NDA beforehand to avoid premature public disclosures.
• Implement strong hiring procedures: Don’t risk a former employee divulging your company’s key IP, or a new employee improperly sharing a competitor’s IP. We’ve previously discussed how to implement proper onboarding and offboarding policies — check it out.

Scope Risk

“Scope risk”: a court could interpret your patent claims in a way that you didn’t intend – too narrowly or too broadly. Even the most well-crafted claim can be susceptible to multiple interpretations—I’ve seen patent attorneys spend months arguing over the meaning of the word “the”.

In other words, there’s always some degree of uncertainty around what a patent will ultimately cover. When you go to enforce your patent, will it cover the technology that you intended to cover when you drafted the patent application?

HOW TO MINIMIZE SCOPE RISK

A well-drafted specification will maximize degrees of claim scope, and provide some flexibility for interpretation. The following steps can help you deal with uncertainties and secure patents with robust claim scope:

• Put adequate resources into initial filing: Patents are important business tools, which means it’s worth the investment to get the filing process right. Basically, don’t cut corners! A well-crafted patent application can be expensive, but you have only a limited ability to change a patent application after it’s filed. So the best way to ensure that your patent has the right scope is to spend the appropriate amount of time upfront before the initial patent filing.
• Use examiner interviews to minimize file history: “Prosecution history estoppel” is often used by defendants (i.e., competitors who infringe your patent) to narrow the scope of a claim based on arguments made during prosecution. (“Prosecution” is the process of negotiating with the patent office after you’ve filed your patent application, to convince them to grant a patent.) By minimizing written arguments during prosecution, you avoid opportunities for prosecution history estoppel.
• Use consistent terminology across applications: You want to be confident about what the “standard” terms mean in the context of each patent application. That way, when you’re making amendments, you don’t have to do a full-fledged claim construction analysis from scratch each time. So use consistent terminology across your whole portfolio, to save yourself time and be sure about what your claims mean.
• Use diverse language in your claims: To obtain a more diverse claim scope, claim the same thing from different perspectives and with different language, terminology, and category (i.e. system, method). That way, if one of your claims gets a bad interpretation, perhaps you can rely on another claim for a better interpretation. In other words, don’t put all your eggs in one basket.
• Use a mix of broad and narrow claims: This ensures the patent can hold up against court challenges while still serving your business’s core interests. Broad independent claims, along with dependent claims focused on the most valuable features, can be a potent mixture!

Design-Around Risk

“Design-around risk”: A competitor might find a way to produce a similar product without technically infringing your patent. In other words, your competitors could find a way to “design around” the claims of your patent — which could easily happen if your claims are too narrow.

HOW TO MINIMIZE DESIGN-AROUND RISK

Sometimes patent claims are too narrow because they’re too long (wordy), and infringing a claim requires unnecessary steps or components. A competitor can typically design around this type of claim by simply omitting one of the unnecessary steps or components.

But even a short claim (with fewer words) can be too narrow if the wording is too specific. For instance, claims that recite a specific parameter value (“at 375 °C”) is easier to design around than one that recites a range of values (“above 374 °C”).

Don’t make it easy for your competitors to design around your patents! The following tactics can help:

• Describe many alternative embodiments in your patent application: This helps to support broad interpretations in court. In the “detailed description” section of the patent application, try to describe as many examples of how to make and use the invention as possible. A broad range of examples (if described with appropriate language) won’t restrict the scope of your claims; instead, they’ll demonstrate that your claims cover a wide array of technologies.
• Capture a diverse range of solutions: Try to capture both optimal and sub-optimal solutions. In other words, don’t limit your description to the final product or final solution that you found to be best for your particular business. Describe other solutions that you tried along the way, as competitors might find one of them valuable even if you didn’t.
• Use diverse language in your claims: Make sure you cover all the bases in terms of how your invention might be perceived, as well as the different terms that could be used to describe it.
• Use a mix of broad and narrow claims: You want to cover enough ground in your claims — but you also need narrower “backup” positions in case a broader claim gets invalidated.
• Synergy of many patents around common core: You can file a “picket fence” of defensive patents that are meant to prevent litigation against your core technology.
• File continuations: You file a follow-on application with amended claims to cover alternative embodiments or address your competitors’ design-arounds in market. Sometimes, just by having a continuation pending, you can deter competitors from trying to design around your claims. Essentially, the continuation filing creates uncertainty around the scope of protection that you will ultimately own, which disincentivizes competitors from designing around your claims.
• Review by “blue team”: Get an internal group in your company to try and design around your existing claims. Their attempts should make clear where the weaknesses in your current claim strategy are.

WRITE PATENT APPLICATIONS THAT MINIMIZE INTRINSIC RISKS

To craft a patent application that minimizes intrinsic risks, you need to gather the right technical information upfront — including prior art, dates of invention, technical description, and so on.

We’ve put together a FREE template to help you document your invention at every step. Download it now!