Patent Stacking

by Ravi Sood & Chris Somogyi - www.1001001.biz

If you think that you know the value of patents - guess again. Because in most cases, patents are simply treated as a defensive mechanism, in order to protect novel ideas, and to create arbitrary values. That about sums it up! However, there are other dimensions around patents that many executives are unaware of. And that leaves money off the table.

When it comes to patents, the ‘common approach’ is obvious: companies create ideas, then they seek legal advice, and then they secure their ideas through a lengthy and somewhat tedious patenting process. It is a necessary evil - if the long-term financial motives are about margins, and competitive advantages, and so on. So, that is basically about it! Unless of course the time ever comes when the patents need to be defended, and that’s another ball-game! Oh, and how do I know this? Well, just ask any CEO or CFO, of any mid-sized venture or small enterprise, how much they love the world of patents, and the litigation game itself. Hint: Nightmare on Elm Street!

The main problem with this common approach to patenting is clear: It is a one-way street that leaves a bunch of creative opportunities off the table. The patent process is costly and time consuming, I would also argue that the underlined pessimism and frustration around patents is largely self-induced. But don’t blame the patent system alone, because most business executives are a bit unrealistic when it comes to the benefits of patents. I think that this limited mindset has to do with legal pre-conditioning. Yes, lawyers, and the entire judicial system, kind of ‘run the show.’ And frankly, they all make a great living off of this dated process. At the same time, things move so fast that one has to wonder if there is more value in continually striving to be better (innovate), or to simply believe that the one idea, that you do have, is it! This is why most executives think and treat patents as preemptive, defensive mechanisms, rather than being strategic and proactive about them.

Things to consider:

First, patents are useful. Aside from their defensive values, they are a detailed lens into the competition, and thus a means to benchmark where you stack up against the grain. This insight is also a way to accelerate and optimize a company’s own internal research & development practice in order to offset R&D costs, reduce time, and risk.

Second, patents are more valuable when they are perpetually reviewed and optimized, especially in tandem with any ongoing development efforts. This approach doesn’t require costly patent lawyers (those folks are needed intermediately, during the provisional cycle, and near the end of the patenting process). Even the process of writing provisionals doesn’t need to be drafted by lawyers. Patent strategists can affordably do a perfectly fine job.

Third, depending on the business, there might be potential for true branding opportunities. Now I don't want to make this article about branding (because I have enough articles about that topic already). But simply put, if there are novel and securable processes, within the creation or manufacturing process, I can assure you that there will be creative ways to thread and sequence marketing touch-points, towards a customer base, within that process/experience. This is where brands can be further legitimized and valued. For example, such IP could include process oriented algorithms that optimize values for the customer. And let's just say that intangible assets, such as patents and brands, can go hand-in-hand, especially in terms of values.

Moving forward, this ongoing approach to patents and innovation demands strategic foresight from patent strategists, technical minds, and creative thinkers. It is a process that continuously stacks and layers a stronger and more valuable patent portfolio. When deployed proactively, an integrated patent strategy mitigates risks and improves corporate valuations. We call this process patent stacking. . 

Patent stacking is also a discipline that opens up new strategic partnerships. In fact, some of these new stakeholders will find you, because of your patent portfolio. If done wisely, a well-conceived patent portfolio, stacked against the competition, is a beacon. Let me give you some real examples…

I have had several clients who have lost money from their investments in new ventures. Part of the problem was their due diligence around the competition, products and the venture’s innovation practices. In some cases, the ventures struggled at raising capital at favorable terms because they did not demonstrate a reliable innovation discipline. Startups need IP protection, and it is right and wise to tout a patent portfolio of their own. But these do not present a complete picture of the overall competitive IP environment. Such information should be part of standard investor diligence, but let’s be honest, investors rarely read competitive patents.

I have found with many entrepreneur clients that their fundraising pitches, around IP and innovation value, presents an incomplete and unclear picture. Rarely is there an accounting of how their ideas were conceived, formed, benchmarked, improved and then developed. The investment pitch typically begins with a quick back-story, of some eureka moment, and that was it. What discerning investors love to see is an ongoing discipline around innovation, especially with later-staged ventures. And in some cases, when it comes to the final product(s), investors want to understand how these products evolved, especially when sales, margins, or traction metrics, didn’t move the needle.

I had a client, who’s product idea was essentially copied by a larger vendor partner. There was nothing that the venture, or the investors could do about it, even with a patent in hand! Why? Because they would have sunk the balance sheet in litigation costs etc. And besides, the patent itself was weak on its own. After digging into the evolution of the product with the technical team, I felt that there were missed opportunities to write a few more provisionals, but it was already too late. What was worse is that the venture, and the investors themselves, never knew how much intellectual property preceded this venture’s initial eureka moment. After reading enough IP in the space, a new idea surfaced, and we were able to conceptualize an entirely new product. 

Here is another example from a large Fortune 500 client. After reading 80+ of their top patents, we narrowed into two ideas that seemed pretty ground-breaking. We sketched them out and designed two different plans to develop and bring them to market. We even came up with adjacent ideas with one of the patent sets, simply from sketching out new possibilities based on other brands in somewhat similar spheres. In the end, the pitches went well. But the point is, we never would have come up with all these ideas, had we not read the IP documents in the first place. The patents were like treasure maps, full of idea, from concepts conceived by inventors. We simply needed to thread a few of the provisionals patents together, and then come up with something even better. And that is what we did.

We believe that by employing patent stacking, companies young and established can develop strong IP and hone their portfolios to be the most effective and efficient. Doing so will build confidence among prospective investors and partners.