With a background in cloud computing, internet of things (IoT) technologies, and machine learning (ML), Rick Hamilton is a named inventor on more than 1,045 issued US patents, placing 15th on the list of most prolific inventors in world history – just behind Thomas Edison. He has more than 25 years of patent portfolio development and governance experience, and 13 years of portfolio usage and organizational strategy experience. This includes establishing and leading patent strategy for a Fortune 10 healthcare company. He has spoken on innovation and intellectual property (IP) management, ML, cloud computing, and IoT technologies in 32 countries, and has trained thousands of technical and business staff on best invention practices.
The focused ultrasound ecosystem depends on a blend of sophisticated IP approaches, including both open data sharing and proprietary solutions. Although they seem orthogonal, the two approaches work together to advance the industry’s objectives, and ultimately each benefits the patients who stand poised to gain from this emerging healthcare technology.
In many early-stage technology development efforts, open data sharing and open standards draw heavily from the information sharing found in academic settings and contribute to rapid knowledge growth. However, as technologies like focused ultrasound mature, proprietary solutions engage the profit motive and allow commercialization of these advances. Such proprietary solutions may be protected by a combination of trade secrets and patents. Trade secrets (or more correctly, confidential information) are often most appropriate when individual innovations are undiscoverable (i.e., their use could not be detected in a competitive product). However, patent protection is most important for critical business differentiators whose use could be discerned by watching a competitive product in operation, running test cases on the solution, or otherwise saying with some degree of certainty that the invention has been adopted by competitors.
This blog aims to share a high-level “Patent Strategy 101” overview with focused ultrasound ecosystem participants. It explores the questions of “why patent,” and “what to patent,” among other lesser topics. I provide business advice on the choices you may decide to make, drawn from my lengthy experience in a variety of innovation and IP roles. Also, disclaimer: I’m not offering legal advice; I’m a technologist and business leader, not an attorney, so seek out legal expertise as appropriate.
Commonly Asked Questions
Why should I care about patents?
Let’s begin with a big-picture question: Why should we care about patent strategy and protection? For many of us, patents have little impact on our day-to-day activities. But if you’re investing in technical innovation, as found in the focused ultrasound ecosystem, then patents become critically important.
As technology revolutionizes numerous industries, patents are increasingly relevant in areas where they might have been unimportant in past years. Over the past two decades, we’ve seen retail and distribution, transportation, and finance fundamentally disrupted by technology. Those same disruptions are happening in healthcare now, and with each technical advance, the same patent concepts that played out between pure-play technology companies also become pertinent to new sets of companies. Over time, many previously non-tech companies recognize that they also need a patent strategy.
A web search on “patent horror stories” reveals countless start-ups who recognized the value of patenting their ideas too late, or who unnecessarily constrained their patents, limiting future business plans. Some start-ups have seen their innovative ideas copied and commoditized, left to compete based on price alone. Others have pursued narrow protections, thinking they were doing the right thing, only to realize that their narrow claims were easily circumvented. Yet others have successfully protected a first-generation product, only to find that others had preemptively swept up the next logical product evolution, locking them out of future enhancements.
If you’re investing in technology and doing innovative work, you may be able to ignore patents for many months or perhaps even years. But you’re walking through the proverbial minefield. Doing so can be a bet-your-business proposition, and your company may suffer for this lack of preparation. A solid patent strategy hedges business risks and leverages your strengths.
Should my company try to file a patent?
At the most general level, you should file patents if your business strategy dictates that you do so. For example:
- If your business needs to prevent others from copying products or solutions, this determines your IP strategy.
- If your business needs to monetize your patents, this determines your IP strategy.
- If your business needs to soothe the nerves of investors by proving the novelty of your technology, this leads to other questions that can ultimately determine your IP strategy.
If soothing investor nerves is your goal, what is the best way to reach that goal? In all likelihood, you soothe nerves by ensuring that your competitors can’t copy your solutions; but consider what you want to demonstrate to investors. Regardless, patent strategy should follow business strategy, so ensure that the two are linked.
But can I actually get a patent?
Another factor to consider in whether to file patent applications is this: In all cases, to get a patent, the filed invention must be new, useful, and nonobvious. These terms have legal meanings, so seek legal advice. From a technologist perspective:
- “New” means both chronologically new – and original. You can’t patent what someone else has already thought of and publicly disclosed. In the US, you have 12 months to file a patent application after your invention is publicly disclosed.
- “Useful” means it provides some identifiable benefit and is capable of use. Similarly, you can’t patent a concept or abstract principle.
- “Nonobvious” means that a person of ordinary skill in the art wouldn’t necessarily think of this invention.
Connecting the Dots: Which Patent Strategy Fits Your Company?
Most technology companies – and this includes health tech companies – pursue one of four options for their patent strategy:
(Note: Other reasons exist to patent, of course, but they’re often secondary and don’t drive critical decisions. These reasons may include projecting external brand image as an innovator in your chosen field. That image may also be reflected internally: filing to make employees happy [i.e., incurring costs to placate researchers]. These personnel issues may be valid, but you don’t need my advice on how to keep your researchers happy.)
I also urge you to define business use cases for your chosen strategy. Anything you file should ultimately fulfill one of these use cases. As illustrated below, these can provide a foundation for your efforts, which can guide individual filing decisions.
No discernible patent strategy
Let’s begin with companies who have no discernible patent strategy. Why would I even include this approach? I do so because this, frankly, is a surprisingly common occurrence. This approach may be in place because leaders believe patents are irrelevant, or they may have some idea of relevance, but no idea what to file or what to do with patents once issued. These companies may overtly decide to simply not patent, or they may file periodic patents without thinking through their end usage. Either way, no IP end game has been articulated.
So, what might get filed, with no discernible strategy? Some companies may patent without forethought, which results in disjointed filings. Further, depending on organizational size and structure, friction – such as in funding mechanisms – might exist. Imagine two development teams in which, because of leadership preferences or departmental finances, one team files patents while the other does not. As a result, gaps may be present: Unimportant components may be protected, while important components are not.
It’s not a big surprise, but this is not an option if your company is doing technically innovative work. I suggested defining business use cases to back up your strategy above, but frankly, I can’t suggest use cases if you pursue this approach. Your company may have started here, but as your business environment and technologies mature, your patent strategy should also evolve.
Mitigating copying, the second option, begins to create business value. Companies choose this approach for reasons that are fundamental to the global patent systems. If you are making investments, taking risks to push the boundaries of science and technology, you want to maintain sole rights to practice your invention. Rather than simply running faster than competition, you now place hurdles in those competitors’ paths to protect your investments.
This is the simplest strategy to understand and execute, and it is also often a great place to start. What might you want to patent if you’re following this approach?
To mitigate copying, you identify and consider protection for your business’s key differentiators. This includes those unique functions, features, or capabilities that deliver value. This is typically where most start-ups begin, with a possible diversion into outbound licensing, which I’ll discuss shortly.
Business use cases to guide patenting to mitigate copying might include elements or innovations that:
- Protect your greatest revenue sources
- Create barriers to entry (i.e., those elements your competitors would need to enter a marketplace)
- Reduce costs or create efficiencies
- Offer user experience improvements for providers, practitioners, patients, or others in your ecosystem
These business use cases are not comprehensive. But if you say, “Our strategy is to mitigate copying and inhibit commoditization,” then you can identify the use cases of greatest relevance to your company.
Freedom of action
Freedom of action, sometimes referred to as freedom to operate, becomes more complex. (Side note: Most IP strategists consider freedom to operate to be the result of a patent clearance search – which pertains to others’ patents, not your own. However, these terms are sometimes used interchangeably.)
Freedom of action is a common enterprise strategy to mitigate risk but is seldom adopted in full by smaller organizations. The questions, of course, are what freedom of action means, and why do companies pursue it? Freedom of action refers to the ability of a company to sell solutions in the marketplace. This is often a superset of the last approach, mitigating copying. You may seek to mitigate copying, but also take your efforts one step further. Freedom of action means having enough patents or cross-licenses so you can launch products and are comfortable with patent infringement risks. There is an implicit recognition that you cannot clear all the patents for your products. There are different ways to obtain freedom of action, including preemptively seeking licenses, but here I address a common approach: Companies mitigate risks by seeking the ability to counter-assert against patent aggressors, who are often their competitors.
The reasons that smaller organizations seldom fully pursue this approach are two-fold. First, it’s commonly used in ecosystems with highly complex solutions, which may embody hundreds or even thousands of patents per solution. Many start-ups are operating in greener fields, where this may not be the case. Second, pursuing this approach is highly expensive. It often implies filing (at least) hundreds of patents per year to provide counter-assertion leverage, with costs that may be unrealistic for small organizations.
This approach entails mitigating risks by seeking leverage over others in your ecosystem. It’s a common enterprise strategy, practiced by large technology companies, but it can be an expensive approach. Large technology companies may receive hundreds or thousands of issued patents per year. They do so in recognition that all innovations build upon other foundational technologies, and to the extent that those foundational technologies are patented, it creates business risk for the innovator.
Let’s suppose I have a marketplace competitor in a technology-focused area. I’m investing in technical innovations, but not supporting those innovations with a patent portfolio. One day, my competitor announces that I’m infringing their patent. I pull my engineers, scientists, and attorneys together behind closed doors to discuss it. If we believe there’s a chance we might be infringing, we have few options. From a legal perspective, I could try to get his patent invalidated. Otherwise, I have three organic business options: 1) I can pull my product off the market; 2) I can request a license; or 3) I can ignore my competitor and hope he goes away. If he doesn’t go away and takes me to court, I now run the risk of willful infringement and the possibility of paying triple damages. This recognizes that infringing a patent after you’ve been put on notice may result in courts stipulating higher damages because of your continued transgressions. These bad options exist because I’m in a position of weakness – innovating without a portfolio. If conversely, I’d backed my innovations with patents, I might have other business possibilities. Ideally, I’d like to say to my competitor, “We also need to talk about these two patents of mine, reading on your solution.” Now, I’m in a position of strength, and we may sign a cross-license agreement. This allows us to compete in the marketplace, which is where we want to be.
Business use cases for this strategy might include:
- Protecting existing or planned revenue sources
- Protecting white space for solutions not-yet-planned, but which represent potential solutions
- Gaining leverage over existing or potential competitors
- Improving terms and conditions of broader business negotiations
Again, this is an enterprise approach, best suited for deep-pocketed companies with diverse products and interests. That said, a smaller company with a limited solution line may weave elements of this into a different strategy (e.g., mitigating copying, but seeking expanded claims to provide some degree of counter-assertion leverage). Finally, small companies may instead choose to conduct a patent clearance search, combined with one of the other strategies (e.g., mitigating copying and/or outbound licensing).
Last up is outbound licensing. This is a common approach in academia and with tech transfer offices and may also be practiced by both operating companies – those that produce goods and services – and non-practicing entities.
Many people think they’re going to file a couple of patents then make millions when those patents issue. It’s not that simple. Companies often pursue outbound licensing when their revenue plans are not solely dependent on product or service revenue (i.e., patent monetization is an integral part of your business strategy). But outbound licensing can also be used to force other business conditions. If you have patents that others need access to, you can use this to create business advantage, driving partnerships or affecting other business terms. Regardless of whether you’re seeking monetization or ecosystem influence, your goal is to license and/or assign patents. Licensing means that you grant others the right to use a patent; depending on exclusivity terms, you may license a patent multiple times. Assignment simply means selling the patent to another party, where they may then have the right to license that patent to third parties. As you may imagine, this approach may occur alongside either of the previous two approaches. You can choose to mitigate copying, seek some degree of freedom of action, and also pursue outbound licensing.
A word of caution: Many newcomers overestimate their ability to license. In patent licensing, you get what you negotiate. Consider hiring an experienced licensing executive, and don’t underestimate the level of nuance and complexity required as you begin your licensing journey. (This isn’t a paper on licensing strategy, so I’ll save the details of this possibility for another day.)
What gets patented in this case? Outbound licensingimplies that you understand your licensing prospects and their business interests and preemptively seek patents that they will need to license. This is a challenging strategy, and requires careful consideration of your brand, among other factors. Monetization nuances abound. You need to understand your prospective licensees and their growth plans. Will licensing exist alongside your own production, or are you looking to solely license? Will you pursue carrot licenses or stick licenses (i.e., are you cold calling to say, “Here’s an opportunity for you to grow your business,” or hoping to monetize by saying, “You’re infringing.”)?
Business use cases help define both the macroscopic areas you seek to patent as well as specific topics you pursue. If you’re entertaining a broader pool of licensing prospects, then you might entertain broader patent subject matter. Are you seeking to license only direct competitors, or others in surrounding, related industries? Are you patenting concepts that others are trying to invent now, or looking down the road to patent inventions that will be needed in the future? Your invention must be operable now to patent, but you may want to place long bets that you’ll see the future value of certain inventions before others. Your answers to these questions will lead to those use cases that your patent filings should fulfill.
Pulling It All Together
Let’s briefly recap. Your business strategy determines your patent strategy, and I’ve just examined the four most common approaches to connecting patenting with your business strategy.
Recognize that this is a journey that can take years. Your views and approach can change as the facts change. Some established companies have gone through various strategies over decades and are now primarily monetization companies. I’d also note that the last value contributions on asset sheets when a company is liquidated are often patents. So, it’s easiest to begin with a highly defensive posture and slowly move toward some form of monetization. In an upcoming paper, I’ll address best practices (i.e., “how to patent,” with consideration of both universal best practices and a brief tour through leading enterprise conventions).
The focused ultrasound ecosystem is changing rapidly, and navigating these changes will require constant refinement of strategy and tactical approaches. With an eye on patents, specifically, you should always have a strategy. But this strategy can change to best reflect prevailing market needs and technological advances. Good luck on the journey ahead.
Rick can be reached at firstname.lastname@example.org with questions about patent strategy.