November 24, 2005

Attenuate Goliath’s Patent Strength

Posted in David vs. Goliath, management at 10:38 pm by scottmaxwell

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:

  1. 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).
  2. 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…



  1. […] A Patent portfolio and ongoing new patents […]

  2. Chad Harrington said,

    When I talk about “offensive” and “defensive” patent strategies, I (and others I assume) am referring to getting patents to use against others (offensive) or getting patents to use as bargaining chips if someone comes after me. In today’s patent-crazed environment, no technology company can afford to be without at least a few patents to use defensively. Additionally, many millions have been made by “offensively” licensing patents to others (see NTP v. RIM, etc.) Whether or not a company’s morals permit the offensive strategy, it should definetely pursue patents as a defensive strategy.

    Do you agree? Love the David v. Goliath series, by the way…

  3. scottmaxwell said,

    Thanks for the comment Chad. I definately agree. I am not a big fan of companies that get patents for the sole purpose of using against others (not really the intent of the patent system in the first place), but I do believe that every company that has the innovation needs to get patents these days, at a bare minimum as “bargaining chips.”

  4. […] I mentioned our Insight Development Forum in my last post. Another topic for our forum was patents. (I am becoming increasingly concerned with the patent system, but it seems that the pragmatic approach for most companies is to seek patents at this point.) I had a post on patents in my David vs. Goliath series, but continue to try to determine the absolute simplest and most effective approaches to resolving patent issues. […]

  5. Jason Bengiat said,

    I think that the government should put tax dollars into reducing patent fees. The cost of getting help writing a patent is obviously expensive enough, and a country that values small people who try to get ahead – in my opinion, could do less to hurt people by reducing patent fees. Tax dollars go to every other public service – obtainging a patent should be something that every American should be expected and encouraged to do to improve themselves and the economy. I know I’m sounding idealistic. Where can I find people who might be interested in some of my patent ideas and sharing in the royalties that result from successfully bringing them to the market.

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