By Robert R. Axenfeld
Special to the Legal
Innovation is the basis for success in business today. Consumers and investors are attracted to companies that innovate.
It follows that protecting innovation is the cornerstone for preventing competitors from freely copying a company’s advancements. Indeed, patents and trademarks offer two symbiotic ways to protect innovation. For instance, patents protect new designs, technologies and processes. Patents may also protect aesthetic features of products.
Conversely, trademarks protect brand names, marks, logos and symbols associated with a company’s products and services.
So when used together, patents and trademarks protect innovations that often underlie competitive advantages of a company over others. Put differently, patents and trademarks help protect those features of a company’s products or services that differentiate them from a competitor’s products or services.
Still, innovation starts with ideas. And it is often challenging — especially at the outset — to foresee which ideas will succeed and which will not. Thus, it is difficult to know when and how much to invest in intellectual property (IP) assets — such as patents and trademarks — to protect an idea.
Nonetheless, these IP assets are akin to an insurance policy. For instance, if the innovation becomes a success in the market place, the IP assets may help ward off competitors through enforcement. In other words, patent and trademark assets may serve as an offensive weapon if a third party attempts to rip off a company’s innovations.
Even if certain innovations are not successful in the marketplace or become aged, the IP assets used to protect them may still offer value through licensing or sales. For instance, many larger companies, such as IBM, Kodak, AT&T, Nortel, Alcatel-Lucent, and others auction off or license their legacy patents, which are no longer a part of the company’s core business.
Patents and trademarks also serve as embedded assets of a company. For instance, suppose a company’s strategy is to eventually seek a buyer. Without the intellectual property assets, an acquiring entity will simply value sales, know-how and inventory. Instead, with the intellectual property asset listed on the company’s books, these assets should make the company more attractive to potential acquirers that look for intangible (i.e., intellectual) assets to value, and transfer as part of a sale.
Still further, if a company ever desires investment money or a loan, these patent and trademark assets are securable, and offer a mechanism for third parties to secure the investment or loan.
Additionally, patents and trademarks can also be monetized through licensing opportunities or sales in the future.
Yet another strategy behind securing patents and trademarks is to help ward off former employees from becoming instant competitors. Here, the patents and trademarks serve as protection against former employees that start competitive ventures by freely riding off the coattail innovations of their former employer.
Of course, there are other advantageous as well as risks in investing in patent and trademark assets, and the merits of investment must be aligned with business goals. Below are some benefits and risks of investing in patent and trademark assets in particular. Ultimately, this is a business decision.
- Patent and trademark assets offer protection (offensive weapon) against competitors if the patent issues or trademark registers.
- Patent and trademark assets are embedded assets of the company, which are exchangeable as part of a sale (may offer more value to a potential suitor than know-how alone).
- Patent and trademark assets are securable against investment or loan in company.
- Patent and trademark assets may be licensed or sold in the future.
- Patent and trademark assets may ward off potential theft by employees.
- Investment may not pay off.
- Idea or mark may not be patentable or registerable, respectively.
- Patent or trademark application may be challenged or opposed.
- Costly processes.
- Costly to police, maintain or enforce weaker trademarks.
- Time consuming.
- Technology may be mooted before or after a patent issues or trademark registers.
In conclusion, if your company is looking to protect its innovations and achieve maximum success in today’s increasingly competitive marketplace, patents and trademarks often serve as a form of insurance — hedging against losses while allowing protection of a company’s most valuable assets.
Robert R. Axenfeld is the chair of the intellectual property litigation group and chair of the patent group of the Mid-Atlantic-based law firm of Offit Kurman. His practice focuses on patents, trademarks, copyrights and trade secrets, and on the procurement, licensing, monetization, defense and enforcement of intellectual property rights, as well as cyberlaw and Internet issues. He is a registered patent attorney with more than 22 years of practice of patent law and is regularly involved in patent enforcement and defense against claims of patent infringement, including involvement in re-examination and post-grant proceedings before the United States Patent and Trademark Office.