Introduction

As I write this, it's possible that you or your company may be developing a technology, process, or device that will give you an edge over competitors or even transform the marketplace. But it's also possible that through mismanagement, short-sightedness, or a lack of funds the ability to monopolize that innovation (or an improvement) will slip through your company's hands. That possibility is not as unusual as you may think.

"My father invented the burglar alarm which, unfortunately, was stolen from him."
-- Victor Borge

It's also possible that your company may be on an equally wrong-headed course of patenting everything despite the fact that most of these technologies have little chance of earning back the hundreds of thousands spent for patent filings and prosecution. Hopefully, this book will help you avoid both courses of action -- alerting you how to protect what you've got, and avoiding the cost of dubious patents.

"Patent" -- the word connotes idea, invention, ingenuity, innovation, improvement protection, asset, expense, mystery, land mine, hurdle, or frustration. But the connotation that I'd like you to make when you think of patents is business. That's because the relationship between patents and business is inseparable. And by thinking of patents as a business proposition, you can see them in terms of costs and benefits, not simply as a hybrid of technology and law. After all, patents are one of the most valuable assets in U.S. commerce, operating almost as a discrete form of currency. Businesses create them, buy and sell them, barter with them, fight over them, and often die because of them.

In fact, it could be argued that American's success as a global marketplace leader is based on its patent system. Bill Gates has said that Microsoft, at any given time, is only two years away from failure. His basic message is that all companies have to innovate to survive. Since innovation inevitably begets competition and since the only the reliable way to protect innovation against competition is by patents, it is essential that everyone involved in the innovation business be patent savvy.

Whatever level of interest you have in patents, there is no denying their importance in commerce. In its 230-year history, the United States Patent Office (better known as the U.S. Patent and Trademark Office or USPTO) has issued over seven million U.S. patents -- No. 7,000,000 was granted to DuPont in 2006 for biodegradable, cotton-like fibers useful in textiles. Thousands of patents are also the subject of litigation each year -- for example, 2,720 patent cases were filed in 2005. (No doubt you've read about some of this litigation.) And every day millions of dollars pass hands among U.S. companies as valuable patents are bought, sold, and licensed.

And always, there are more patents on their way. Over 300,000 patent applications are filed annually in the U.S., and about half those applications become patents. In one week while I was writing this book, Patent Office examiners considered patent applications for a system for estimating the cost of fishing gear, a method for managing property cleaning services, and a system for prepurchasing air flight miles.

So, let's start our journey by exploring some patent principles and myths.

Patent Principles

Here are ten patent principles that I'll explore in this book:

• Patents offer no guarantees. Patents, although prevalent and important, offer no absolute guarantees. Often, it cannot be reliably predicted whether your patent will have economic value -- that is, whether or not your product will sell well because of its patented features. It's also often difficult to predict how a competitor might engineer a viable competing product. And sometimes it's tough to determine whether someone with a prior patent will have a case against you should you sell your patented product -- even if a search is conducted before your patent application is filed. Don't let this rule of "no guarantees" scare you away from patents. After all, at the beginning of any product innovation, nobody knows for certain whether a new product will really sell, what it will really cost, or whether it can be successfully engineered and manufactured at a reasonable cost. The unpredictability of patents is really a reflection of the unpredictability of commerce.
• Many (maybe even most) patents do not provide any real value. The number-one reason for this is patent claims -- the patent's boundaries -- which are sometimes too detailed with too many requirements. When no effort is made to predict how a competitor might engineer a competing product, or when care is not taken with the prosecution of the patent application, the resulting patent can be rendered useless because of even a single word in a patent. Other times, the patented invention itself is narrow, in light of the state of the art at the time the invention was made. So, just having a patent is not always enough.
• Some patents have unintended consequences. Even a worthless patent, by sheer virtue of its existence, may stop a competitor in its tracks if the competitor believes that the patent prevents him from competing. Also, patents which are unintelligible, clearly invalid, and/or seemingly irrelevant sometimes thwart competition by competitors simply because it's not worth the fight, or because it's cheaper to settle than to litigate.
• The Patent Office, like any organization, makes mistakes. Unintelligible and invalid patents do issue. Fortunately, there are mechanisms to correct the mistakes, like a reexamination at the Patent Office or an invalidity defense raised in court.
• There is no room for knee-jerk reactions in patent-related decisions. Patents are expensive, and patent litigation is even more expensive. Companies must thoughtfully consider their patent decisions and not apply conventional wisdom or "go with their gut." Those who fail to heed this advice will wish they had patented more or that they had taken someone else's patents more seriously.
• A patent alone does not make you money. Inventors and business-people sometimes believe that the money will come rolling in if only they had a patent. Patent-savvy people, though, know a patent is just a document. Innovative products and services make you money. If those products and services are properly patented, you might make more money. Or, if you own a valuable patent covering technology that someone else wants or has implemented in their product or service, they might pay you for your patent either by choice or as a result of litigation. Therefore, without a product or service, without a licensing program, or without litigation, no payments are made to the patent owner just because he holds a patent. Like the engineering and technology underlying a product, patents are a necessary but not a sufficient condition for product success.
• Some products sell just fine without being patented. This is a corollary to the previous principle: A patent is not a condition precedent to good sales figures; innovation and quality is. I would venture to guess that many of the products on the shelves of a typical box store are not patented. Therefore, not having a patent is not the end of the world. Some products sell well because they are the first of their kind, are of good quality, and have a distinguishable design, or for a myriad of other reasons. I often get asked if a given invention is worthwhile. That's the wrong question to ask a patent attorney. The "Pet Rock" sold well. I never would have believed people would pay for bottled water. Only your company can properly judge the marketability of a new product.
• There are no shortcuts to patent protection. In Chapter 6, I explain the inherent challenges with the provisional patent application -- a simple document that will preserve your rights at the Patent Office for one year. I also explain that if inventors don't spend sufficient time with the patent attorney, the result can be that you pay a high cost for a patent with a low value. The same is true if a company fails to document its steps in the patent review process. In short, you can't cut corners when looking to protect company innovations.
• All things patent are costly. Through this book, I have included a running total for your patent costs from the time an innovation is identified, through the patent review and the filing of a patent, then through patent prosecution and foreign filing and post-issuance activities. As you can imagine, acquiring a U.S. patent is expensive (foreign patents are even more expensive), and the cost of patent litigation is ... well, astronomical.
• All things patent must be managed or else the first nine principles have no real import. Without patent management, a lot can go wrong -- for example, people rely too heavily on patents for competitive advantage, patents of low value are procured, business opportunities are missed, mistakes by the Patent Office are left uncorrected, and wrong decisions are made regarding your own or a competitor's patent. In short, a company sometimes pays a high price for failing to properly manage its patents.

Patent Myths

Considering the crucial part patents play in American commerce, it's a wonder, then, that there are so many inaccuracies in the business world concerning patents. Below are some of the myths that will be debunked in this book:

• You must conduct a patent search before filing a patent application.
• You can file a worldwide patent.
• There is a patent application form you can fill out.
• Patents can be reliably searched on the Internet.
• You can still get a patent so long as a prior patent doesn't disclose your idea in the patent claims.
• You can't patent software, financial tools, or business methods.
• A competitor cannot copy your product because you have patents pending.
• The most important thing is to file the patent early; you can always add things to it later.
• You can predict with confidence exactly what a patent will cost.
• The marketing department has no business in the management of patents.
• A patent application need be understood only by those skilled in the art.
• Patents are primarily for revolutionary ideas.
• Your patent will sail through the Patent Office.
• Having a patent will stop poachers.
• The company with the most patents wins.
• If you can't get a patent, you can always use trade secret (or copyright or trademark) law to protect this product.
• Everything you need to know about a patent is on the title page.
• Having a patent means you are free to sell your product.
• A competitor can't patent an improvement or a new use for your patented product.
• Engineers don't need to deal with patent claims; that's the patent attorney's job.
• If you didn't know about another patent when you created an innovation, you're not infringing.
• Most patents have commercial value.
• You have to wait until you get the patent before you can sell a product.
• A patent is good for forever.
• Most infringers will stop copying when notified by an attorney.
• You can extend the term of a patent.
• You can file provisional patent applications in foreign countries.
• A provisional patent application allows you to stop a competitor from making the product.
• Patents are boring.

Hopefully, I'll bust the last "myth" within one or two chapters.

Comparing Lifecycles: Patent and Product

Before we review several case studies and patent management principles, it's a good idea to review the lifecycle of a patent. The flowchart below illustrates the nine steps in the lifecycle of a patent. This cycle takes 20-25 years to complete. The lifecycle does not include foreign patent protection (typically initiated within a year after the U.S. patent application is filed) and also does not include the potential for patent litigation, which can seriously affect the lifecycle. I'll also provide basic management tasks.

• Invention. This is the innovation process, sometimes known as the "Eureka" moment that results in something new and nonobvious. Your company's goal at this point is to recognize that the innovation may be protected under patent law and to treat it accordingly -- for example, to preserve confidentiality and to avoid sales or public disclosure until a full patent review has been conducted. Later we'll learn that to be patentable, the invention doesn't really have to be the subject of a "Eureka" moment or even be remarkable. In fact, many patents cover new functionality or features added to an existing product or device.
• Invention Capture. This is the procedure for recording the idea, innovation, or improvement, for example, by the use of inventor notebooks. Your company must maintain accurate documentation for a variety of reasons, the most important of which is to confirm the dates of conception and the dates when the innovation was successfully tested. As between two companies fighting over the patent rights to the same invention, one way that conception of an invention is proven in court is those inventor notebooks -- bound tablets with places on each page for the date, an inventor's signature, and witness signatures. Later I'll teach you an easy way to capture inventions.
• Determining Whether to Seek a Patent. This is the process whereby your company's patent review committee, those managing a project, or a "tiger team" meets to evaluate whether it's worth proceeding with a patent filing. Don't worry if your company doesn't have a patent review committee. Later, I'll discuss how to create one.
• Patent Application Drafting. Once the decision is made to seek a patent, the drafting process begins with an "interview" between the inventor or inventors and your patent attorney, followed by the drafting of the application. Subsequently, company managers will review the application prior to filing to ensure a patent with a planned and definite purpose is being pursued.
• Patent Application Filing. Once it's drafted, the patent application is filed at the Patent Office, kicking off the "patent pending" period.
• Patent Prosecution. This is the process by which your patent attorney shepherds the application through the Patent Office, overcoming or resolving any examiner objections. If necessary, your company may be involved in resolving objections from the patent examiner.
• Patent Issuance. Victory. The Patent Office has granted your patent.
• Patent Exploitation and Preservation. With patent in hand, your company seeks revenue for its patent through either sales or licensing and, at the same time, diligently protects its turf by fighting infringers.
• Payment of Maintenance Fees. In order to keep the patent alive (or "maintain" the patent), your company must make periodic payments to the Patent Office.
• Patent Expiration. Patent protection has ended and the public is free to use, copy, and sell your company's previously patented innovation unless you've pursued additional patents covering new ideas -- and kept the cycle turning.

[Product and Patent Development Comparison Chart] omitted for online sample chapter.

As you are aware, the patent lifecycle coincides with the product lifecycle. When we review the product lifecycle in regard to patents, many key product lifecycle events fall between the point of invention and patent application filing. That's for a very good reason. Fewer than 5% of patents are commercialized. So, there's no sense going through the patent lifecycle and payment of thousands of dollars in fees unless the revenue resulting from the patented technology justifies the cost.

Below are the comparative steps in a product's development.

• Market Studies. Sometimes innovation is spurred by market studies. For example, a company sees an opening in the marketplace for a waterproof MP3 player. A market study for new products may result in one or more innovations that trigger the patent lifecycle. Hopefully, your company will not incur substantial patent costs until marketing determines whether the market is weak or strong. Also, the resulting patent or patents hopefully protect the relevant market share expected.
• Conception. Product conception is not always the same as the invention of the patentable technology. Turning a discovery or creative idea into a product that can be sold is often a long process. For example, ten years passed between the date Stephanie Kwolek discovered the aramid fiber and when Dow Chemical first used it in Kevlar bullet-resistant vests.
• Design. The design of the product also runs parallel with the patent's development. The design enhances the functionality and marketability of the patented technology and also influences the cost of goods. The design may also affect the drafting of the patent application, as design elements may trigger new functionality. Finally, an industrial design may give rise to a separate design patent.
• Manufacturability Studies. The information obtained from manufacturability studies influences the decision to patent -- there's no sense patenting an item that will be too expensive to produce. At the same time, a manufacturability study may determine that costs can be cut by changing, substituting, or removing some features, which, in turn, affects patentability.
• Testing. Here is a situation where patents and products may overlap. Testing for functionality, safety, and appeal can all affect the decision to patent, as well as trigger design changes that affect the drafting of the patent.
• Production. A company may prefer to wait to go into production until a patent has been filed or gets the okay from a patent attorney.
• Product Release. As with production, the release of the product may be tied to its patent status. Keep in mind that you cannot stop infringers of your patent until after the patent issues. Product release also starts the clock running regarding what can be patented.
• Sales and Marketing. In the case of patented products, this period usually begins in the period following patent filing (or in some cases, after issuance) and continues until the patent expires. Many products continue to be successfully marketed after a patent expires, relying instead on brand recognition and trademark protection of their name and logo.
• Product Improvement. Here, new features are included in the product or new functionality is added. And, just as the product development cycle begins anew, so too does the patent lifecycle where additional patents are pursued for the new features or functionality.

Sometimes, some of the steps in the patent lifecycle -- for example, invention capture, the decision to seek a patent, drafting, and filing -- all occur just a few days before product release or the start of a marketing campaign. Other times, it all happens too soon, before the design is baselined, for example, and the resulting patent doesn't end up covering the product sold.

There's no perfect fixed process. And, we'll learn later why at least filing should occur before production or marketing and why, if the decision to patent takes too long or is not made until it is too late, no patent can ever be obtained. Like any project, mismanagement of a patent project can result in missed opportunities.

A Word on Patent Management

The gurus tell us that effective project management includes, among other things, lifecycle definition, organization of a team, establishing a budget and cost controls, resource allocation, quality, reliability and maintainability, documentation and reporting, system integration, scheduling, organizing, forecasting, configuration control, and procurement and manufacturing controls.

I view a company's overall efforts at patenting as one large program and each individual patent within that program as a discrete "micro-project." To manage the program and each of its individual projects, one needs to understand the cost-benefit analysis associated with patents, and that the value of a patent is measured by its claims which define scope.

To best track the cost-benefit analysis, I've included several tables alerting you to the costs you are likely to incur in each stage of the process.

Throughout this book, I'll also explain the tools used to manage patents -- for example, the patent lifecycle, patent committees, patent searches, patentability studies, the patent application, and patent prosecution. Using these tools will enable you to put in place and employ effective project management techniques for these costly, time-consuming, and often unpredictable documents we call patents.