In this post, I continue to examine how small businesses and startups can avoid common misconceptions about intellectual property. This time, I turn to patent issues that small and emerging companies must consider to maximize the value they create and capture from their intellectual property.
As noted in the previous post, these misconceptions come from an article in The New York Times.
1. Having a patent gives me the right to produce something.
A patent gives you the right to prevent someone else from producing something that your patent covers. You can sue that party for patent infringement and economic damages.
Many business owners mistakenly believe that a patent provides airtight protection. This is not the case. The other company can claim they are not infringing your patent and can challenge the validity of your patent. Prepare to assert your intellectual property against another company. Know what you are willing to do and how much you are ready to spend on legal fees.
2. If I have a patent or trademark in the United States, I don’t need to worry about the rest of the world.
The more international your business strategy and target markets, the more you need to think about protecting your patents and trademarks in multiple countries. Patents are filed and protected at the national level. Thus, if China or Europe is a big market for your company, or if you have substantial manufacturing operations in either place, you should seriously consider filing a patent appropriate jurisdictions. In many cases, the costs of patent litigation are much greater than the costs of filing and obtaining a patent.
Trademark protection varies across countries. In the US, you can acquire trademark protection by becoming the first to use the mark in commerce. But don't rely just on use. To strengthen your position in litigation, you should also file a trademark application with the United States Patent and Trademark Office.
By contrast, China has a first to file trademark system. However, if the mark is considered "famous" under the Paris Convention, the first to file rule does not apply. I discussed in a previous post how Apple is facing a trademark issue in China with their iPhone because it failed to register its iPhone trademark for mobile phones.
3. People who collect patents but don’t actually make anything are “patent trolls” who make money only by filing lawsuits against businesses that commercialize patents.
The term patent troll is often used to describe to a company that holds patent rights, but does not manufacture or commercialize a product based on that patent. However, the term is sometimes used to belittle companies that legitimately seek to license their patent or partner with another company. Some startups and small businesses do not have the resources to manufacture and market products. There is nothing wrong with a company pursuing this business model. Rather than calling such entities patent trolls, the term non-practicing entity is more appropriate.
Some patent holders, without manufacturing or marketing a product, decide to sue many companies that allegedly infringe on its patents. While it often believed that these entities and individuals take a shotgun approach to litigation, I have posited that patent trolls are economically rational.
Takeaway
If you're a startup or small business, you need to have a legal strategy for protecting and asserting your intellectual property. In developing your intellectual property strategy, make sure that the company's business strategy and priortities motivate the intellectual property strategy. If you do so, your company will enjoy the benefits of a Legally Informed Strategy.
Douglas Y. Park
Twitter: @DougYPark
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