It is true that you only have so much money and that, as a startup company or a member of the Fortune 500, you have to make a financial tradeoff on every decision.
With IP protection and patents especially, many entrepreneurs or business managers have a murky understanding about how the system works.
On one hand, managers know, intuitively, that having a patent gives them some kind of ‘protection.’
On the other hand, managers also know, intuitively, that it takes a lot of money to enforce their patents.
Many entrepreneurs and business managers give up on patents as a business tool because they just don’t see a way they can afford to enforce their patents. It just feels very expensive and, in truth, it feels like a vast unknown path that is intimidating.
Because of the ‘patent troll’ narrative, many entrepreneurs say that they do not want to be a ‘patent troll’ and that they would never enforce their patents anyway. Many people seem to want to take the “high road” by not enforcing their IP – and letting competitors take advantage of them.
My sense is that these entrepreneurs are just too intimidated by the cost and complexity of enforcing their patents that they hide behind the notion of being ‘good’ by letting competitors steal from them.
Letting competitors steal from you is not the “high road”
There is no reward for giving away your hard-earned innovations and lessons learned to competitors.
Patents require that we give away our trade secrets in exchange for our enforceable right to exclude others from practicing our trade secrets.
You earned your intellectual property from your hard work and your innovation.
Why give that hard work to your competitors? You are hurting yourself, your coworkers, your employees, and your shareholders by doing so.
If you start with the assumption that you will never enforce your patents, why get them at all?
Leveling the playing field with IP insurance
IP insurance, and specifically IP enforcement insurance, takes care of the biggest unknown about patents: how can you afford to assert your patents?
Patent enforcement insurance, sometimes called abatement insurance or pursuit insurance, pays the costs of enforcement, which can be staggeringly high.
This changes the game.
Being able to enforce your patents means you don’t have to
Large companies have a ‘mutual assured destruction’ scenario with their patents.
Ever notice that Microsoft and Google have never sued each other, even though many of their products are nearly identical in many aspects? Both companies have tens of thousands of patents, but they never enforce them against each other. Both companies grudgingly respect the other’s ability to litigate.
At the same time, ever notice that many large companies are routinely getting sued using patents from failed startups or independent inventors?
This is because large companies, especially in telecom, medical devices, and consumer goods do not respect patents from small companies or independent inventors.
The lack of respect means that big companies make a business decision that it is cheaper to infringe a small company’s patent than to take a license. It is cheaper – in their eyes – to infringe and just wait for the lawsuit.
Patent enforcement insurance means you might have to file a lawsuit to get a big company’s attention, but it also means that they will respect you.
Virtually all patent lawsuits reach a settlement (even though the attorneys are licking their chops at the huge number of billable hours for a lawsuit). Cooler heads always prevail.
When that large company realizes that you have insurance, all of a sudden you are no longer a small bug that can be squished, you are a formidable adversary in court.
What happens? The cooler heads will prevail and your patent becomes a business tool in negotiating with that larger competitor.
Enforcing your patents does not make you a troll. It makes you a business person.
Being able to enforce your patents is the first step. The second step is leveraging your patents for the good of your company.
When you can enforce your patents, you have many options.
One option is to have your competitor cease and desist. This leaves you with the whole market to pursue.
Another option is to have your competitor pay a license fee. This gives you a financial advantage – not only are you making money when they sell their product, but your product is inherently lower cost.
Still another option is to form a joint venture. A strategic company in your space can offer better distribution and marketing than you can, and that strategic company may just acquire your company.
Yet another option is to cross-license. By cross licensing, you can negotiate to acquire access to a competitor’s technology to incorporate into your own products.
However, you never get to have these discussions until you have the ability to enforce your patents. That is the opportunity that patent enforcement insurance gives you.