Detailed overview of patents 3

Question 1

Importance of Patents

Answer 1

1. Significant corporate assets
   
   • e.g. MPEG-4 = technical standard for video and audio tech. –> manufacturers have to obtain license from patent holders of MPEC-4 tech to use it in their products.
2. First to market company holding valuable patents can foreclose the ability of larger players with capacity to make the product more cheaply, from manufacturing or grant licenses to enjoy the revenues commensurate to if the product was sold by the company itself

Question 2

Patents as revenue source

Answer 2

1. Model 1 –> sole inventor obtains patent on key product > enjoys royalties by licensing/ or using patent to build industry around protected product. (e.g. Bell and the telephone)
2. more common –> successful company with sufficient resources enforces its patent rights against others
   
   • smaller companies derive significant revenue from licensing their patent rights
   • large companies derive large revenues from licensing their portfolios (i.e. collections of patents relating to same product or in the same field)
3. Inventor should have conservative expectations of the income that they may derive from licensing
   - may face hundreds or thousands of related patents & determining when a license is needed is complicated.
   - patent litigation is expensive; many patentees cannot afford to enforce their rights against infringers esp. where infringement occurs in multiple countries.

Question 3

Patent as marketing benefit

Answer 3

1. patent number marking requirement in some countries –> provides notice (to competitors) that product cannot be freely copied because it is protected under law.
2. effective marketing tool –> ensures provenance of the product.
3. “patented technology”

Question 4

Patent as bargaining chip

Answer 4

1.tools to obtain competitive or strategic advantage.
2. e.g. use of patents by owner to obtain cross-license on any competitor’s patents of interest to his/her company.
3. e.g. use strength of patent portfolio to convince competitor that the two companies cross-license patent portfolios to eliminate litigation between them and limit third competitor which would have to obtain licenses on the patent portfolios of both companies.

Question 5

Patents as form of Industry control/influence

Answer 5

1. blocking patent (or enforcing exclusive rights) gives owner control of the related industry or product line.
   
   • claims of most patents are not broad to afford control in the manufacture of all products in any given product category (e.g. patent covering all computers)
     - broad claims do not meet patentability requirements/ if granted –> invalid.
2. an entire patent portfolio or patent essential for implementation of important technical standard > may be so significant that it influences an entire industry.
   - –> may lead to abuse in dominant market position; hence need for competition law or antitrust law to mitigate risk.

Question 6

Defensive uses/ defensive patenting

Answer 6

1. commonplace in context of patent exploitation.
2. three possible meanings:
   - patent/(s) is used “defensively” to prevent competitors from copying a company’s most important product or to create a prior art that will prevent competitors from patenting their own concept.
   - patent/(s) is used to “defend” the company, should competitor launch hostile patent infringement lawsuit.
   - “defensive patenting” refers to inadequate or underfunded patent program.
3. strategically defensive patenting programme is likely no less expensive than an aggressive patenting program.