November 24, 2005
Attenuate Goliath’s Patent Strength
This post is part of the overall posting “How Can David Beat Goliath?- Strategy #7: Attenuate Goliath’s Strength“:
So Goliath has a large patent portfolio and has an ongoing machine to churn out new patents. It is likely, or at least possible, that you will get tripped up in one or more of a large company’s patents if you are not careful (this is becoming a very serious issue for all technology companies).
I find that most emerging growth companies are relatively flat-footed when it comes to this issue, as the emerging growth company has a lot of other issues to think about. But, if they grow well, at some point they are confronted with a competitor’s patents…if companies are not set up for this eventuality, they have a much more difficult and expensive time of it.
I am not an expert in this area. My experience comes from a patent I received based on my Ph.D. work, discussions with my portfolio companies and their advisors, and some level of independent research on the topic. At this point, I do have a high level point of view on the topic that I share below, although patent strategy is an issue that I am actively investigating further, as it seems to be growing in importance.
Addressing the large company patent strength…
From an emerging growth company perspective, you can play defense and offense. Both are important:
- Defensive strategy is all about making sure that you know the patents in your field and trying to understand them in enough detail so that you develop your platform in a way that does not conflict with the patents. (You will need to find the right outside help for this activity and it will take some resources).
- Offensive strategy is all about getting your own patents. Some experts have told me that this is a more important strategy than the defensive strategy. There are three possible benefits for having your own patents:
- Make sure that you have protection that allows you some defense of your approach (it will be harder for others to attack),
- Be in a position to use your patents as a negotiation tool if a large company claims you have violated their patents (that is, the large company violating one or more of your patents will give you a better negotiation position when they come calling).
- Be in a position to monetize your ideas through royalty, and agreements (you can make money beyond your product market sales, if you want to play this game).
Just so that I am clear, I find this whole issue a waste of resources, both yours and everyone else’s. The patent system is in really bad shape and the use of patents really disrupts innovation these days (see Steven Vaughan-Nichols article as an example). That said, we are living under the current system, so we need to develop approaches to maximize our position within the system. Unfortunately, we need to deal with the patent issue as part of this, as you can’t opt out because someone is likely to come knocking on your door if you are successful. If you take the right steps to address these issues, you will at least minimize the large company’s patent strength and potentially gain an edge. And, hopefully, in the longer term the patent system will be fixed!
I continue to explore the issue these days to help give better advice to my portfolio companies. Over time I expect to both update this post and write other posts on the topic. I would appreciate any thoughts or resources that you think would add value to the issue…