Executives of patent valuation companies regularly report that when they when they sift through the patent portfolios of target companies, they have difficulty finding valuable patents. They report that invariably, patents miss the mark. But what is the mark? What is the goal of a patent anyway? Isn't it enough to be able to simply say that your product is patented?
True patent value does not come from being able to say "we have a patent on our product" or "we have 25 patents." True patent value comes when competitors, who examine your patents, are unable to offer a competing product because your patents block them.
What most start-ups and established companies do not realize is that it is relative easy to get a patent, but it is much more difficult to obtain a patent that truly blocks competitors. As a result, start-ups tend to unnecessarily invest large amounts in developing patents that add little value to the company, but instead, simply add expense.
This occurs because start-ups tend to make one very common mistake. They protect their inventions instead of protecting their businesses. Let's look at an example. A particular cybertech start-up was the first to recognize a correlation between a certain pattern of incoming data and the likelihood of an attack. They developed a unique algorithm to identify the pattern, and patented it. The product became highly successful, and in a short period, the start-up had more than 100 employees and more revenue than it ever expected. Competitors took notice, realized that the company patented its algorithm, and hired a patent litigator to figure out how to offer a competing product while avoiding the patent.
It didn't take the litigator long to find a way around the patent. After all, that's what litigators do. He recognized that the start-up protected what it thought was its invention: an algorithm for identifying the pattern. So the litigator guided his client to find another algorithm to identify the same pattern. The competitor is now free to offer a competing product.
What mistake did the start-up make? It protected its invention without more broadly thinking about protecting its business. The start-up should have asked: what will competitors need to do in order to compete with us? In answering that question, the start-up would have realized that it needed to block competitors from identifying the pattern using any algorithm, rather than simply the company's preferred algorithm.
This seems like a simple concept, but most start-ups miss this mark because they are "invention focused" in their patenting, when they should be "business focused." Companies that work with a business-focused patent litigator during the development of their patents are more likely to end up with patents that actually add value to the company.
Originally printed in NRG Magazine.
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