By | Merilee Kern, MBA
According to a January 2018Seyfarth Shaw LLP report titled “2017 Patent Litigation: A Statistical Overview,” the past 5 years have seen a “significant increase” of patent litigation cases filed with the Patent Trial and Appeals Board (PTAB) and the Court of Appeals for the Federal Circuit (CAFC). Last year the United States Patent and Trademark Office (USPTO), itself, published its own report citing a “drastic rise in patent litigation” that also referenced a USPTO working paper ominously revealing that “economists, legal scholars and policy makers are concerned about the impact of patent litigation on the rate and direction of U.S. innovation and on the functioning of the U.S. intellectual property system.”
These and other factoids make clear that patent infringement is alive and well in the United States, most often to the financial dismay of patent-holders who spend untold hours and egregious sums of money trying to protect their intellectual property—and the marketplace edge often reliant on those assets.
However, what ifrather than issuing the knee-jerk Cease and Desist and otherwise going the exhaustive and expensive litigation route attempting to prosecute inadequately responsive offenders, patent owners instead strategically engaged said offenders in ways that actually boost their own bottom lines, accelerates growth, raises capital, and expands market share?While this might sound like a far-fetched notion, it’s exactly what Tim Murphy, Chief Executive Officer of Rebounderz Family Entertainment Centers is doing…and with tremendous success.
Having serially found himself in situations where other competitive businesses were utilizing industry-leading materials and methodologies for which he and his company held patents, Murphy took a surprising, gutsy and rather ingenious approach. Rather than litigating with the sole intention of shutting down the offenders or certainly their use of his IP at the very least, Murphy instead adopted a strategic partnership mentality, enforcing his patent rights in a way that’s earning his company significant ancillary revenue streams and hastening corporate growth.
Below are a few of Murphy’s suggestions on “what it takes” to parlay a patent infringement situation into profits:
- Strategize ways to near-term and long-term monetize. Create new opportunities together in a joint ventureor strategic partnership. New services, additional product lines and spinoff businesses can be created to benefit both parties. Just because an entity hasinfringed on apatentdoes not mean that they want to or intend to continue infringingin the future or that they are unscrupulous. Clearly layout a plan that is ‘win-win’ for both parties and work together to build both bottom lines.Strategize how youand the infringing party can work together as strategic partners ongoing, for the long-term, in order to sustain value. Explore if the relationship can evolve to possibly work together to sell additional products or servicesthat you were previouslynot exploring or that didn’t make sense in the short-term? There are several ways the relationships can be extrapolatedfor mutual gain. It’s just a matter of aptly conveying the value your organization brings to the table, not the least of which is the patent license or usage opportunity for the party that would otherwise have neither.
- Offer a licensing and/or royalty fee for continued use. While you should certainly have a Cease and Desist letter at-the-ready, the other party may actually be unaware of their patent infringement to begin with. Most good business people want to do the right thing and don’t intentionally violate a patent. So develop a program offering a usage license or royalty fee for the life of the patent either payable in a lump sum, as annual payments or as monthly payments to make it easier for the infringingpartyto budget for. Your patent attorney or your company’s corporate counsel can readily help create this license agreement to help protect your company as well as the ownership integrity of the patent itself.
- Make your outreach binary; either work together to monetize or face legal action. Try to give your patent offenders options that make it easy and attractive for them to work in synch with you. It’s not hard to open your net wider to provide new and creative solutions, and opportunities abound. These include1) providing a license for the length of the patent; 2) selling a license for a shorter period;3) providing an outlet for them to sell you their business if that is their intention, or if there is little opportunity to collect a license fee;4) suggestingoperating as a joint venture or partnership such thatyour patent license serves asyour investment into the new entity; 5) creating new products with the infusion of the patentthat each party could bear responsibility for selling; 6) developinga scenario that whereby both parties could come together to sell both companies to a larger entity, such as a private equity firm thatmay purchase both businesses.
- Get a sense ofintent and beware the “patent pending game.” Some infringingbusinesses and manufacturers will claim to have patents pending, however all too often these companies only have patent(s) “pending” that are actually infringing on perfected patent claims of another party. So be sure semantics isn’t getting in the way of everyone’s clear understanding of the legal situation and real ramifications.
- Vehemently protect your well-earned Patent Holder rights. You achievedpatent protection for a reason, and by all means file everything necessary to keep the patent valid and unencumbered. Let the industry know your intentions so there is no misconception of who owns the patent, who has the protected claims, and the rigorous legal action that will be taken against anyone violating yourpatent’s protected claims. Take an offensive strategy by ensuringpatent infringers know with specificity how your claim(s) are far superior than their designs. To accomplish these objectives, have your attorney write letters to the patent infringers as soon as possible, outlining exactly how, when, where and why they have misused your patent(s) without a proper license. Continue aggressivefollow-up and take pictures and collect other evidence, as appropriate, of how the infringers have illegally utilized used your perfect patent. Ultimately, have some bite in you! Always be willing to act and pursue legal action if need be. But, do certainly make every attempt to monetize before going this route as one company’s mistake could very well be your good fortune.
“While we’ve found it highly prudent to work with infringing organizationas strategic partners and settle patent disputes through lumpsum or monthly payments in order to reduce ongoing legal costs for both parties, there are some instances where it’s necessary to use legal means to makepatent infringements work in your favor. In my own experience, my company has settled suits by having the infringing party purchaseour patent license, allowing them to continue to operate their business using our three (3) perfected patents that cover 59 claims.”
Forbes Business Council Member Merilee Kern, MBA is an internationally-regarded brand analyst, strategist and futuristwho reports on noteworthy industry change makers, movers, shakers and innovators across all B2B and B2C categories. This includes field experts and thought leaders, brands, products, services, destinations and events. Merilee is Founder, Executive Editor and Producer of “The Luxe List” as well as Host of the nationally-syndicated “Savvy Living” TV show. As a prolific business and consumer trends, lifestyle and leisure industry voice of authority and tastemaker, she keeps her finger on the pulse of the marketplace in search of new and innovative must-haves and exemplary experiences at all price points, from the affordable to the extreme—also delving into the minds behind the brands. Her work reaches multi-millions worldwide via broadcast TV (her own shows and copious others on which she appears) as well as a myriad of print and online publications. Connect with her at www.TheLuxeList.com and www.SavvyLiving.tv / Instagram www.Instagram.com/LuxeListReports / Twitter www.Twitter.com/LuxeListReports / Facebook www.Facebook.com/LuxeListReports / LinkedIN www.LinkedIn.com/in/MerileeKern.
Marco, Alan C. and Tesfayesus, Asrat and Toole, Andrew A., Patent Litigation Data from US District Court Electronic Records (1963-2015) (March 2017). USPTO Economic Working Paper No. 2017-06. Available at SSRN: https://ssrn.com/abstract=2942295 or http://dx.doi.org/10.2139/ssrn.2942295