The Patent Light

At the risk of over simplification, most companies employ one or more of four quality “levels” patents.  Often companies will have patents from a mixture of the levels below.  Sometimes, this mixture occurs as a result of design and prioritization.  Sometimes, it occurs as the result of political influence within the company or other factors.  Typically, the quality levels are:

Level 1 – Defensive patents.

• Defensive patents are patents usually obtained by large companies having huge portfolios.  The large companies will typically cross license with their competitors and usually will not sue their competitors.  This strategy is conceptually similar to an arms race.
• These patents are “defensive” in nature because if a competitor sues them for patent infringement, they will counter claim with a large number of their own patent.
• Because the patent portfolios are so large, a defendant corporation can often find 20 to 50 patents that can be alleged in counterclaims.  Very few if anyone can defend against 20 to 50 patents (regardless of the validity of the patents), so the plaintiff companies will settle rather than face the litigation costs of defending 20 to 50 patents.
• When using defensive patents, the object is not to protect the technology or obtaining royalties.  The object is to develop a litigation weapon which would make any suit against the company prohibitively expensive.
• Because there are a large number of patents, cost control is important and the quality of the individual patents are often suspect.
• Such patent applications are usually drafted on a “fixed-fee” model.  In a law firm, these patents are drafted by patent agents or very young lawyers.
• IBM created this patent portfolio model when they determined it was too expensive to perform clearance searches on their products and/or to design around the patents of others.  Many large companies have since followed IBM’s model.

Level 2 – Mainstream Patents:

• Although large companies can afford to develop large portfolios often involving thousands of patents, most small to mid-size companies cannot maintain a large number of portfolios.  Thus, most of these companies will opt for mainstream patents.
• Mainstream patents are typically better quality than true “defensive” patents.  They are typically longer in length, have more claims, and more carefully drafted to withstand some scrutiny (either in acquisition or litigation).
• They typically may be used to protect a company’s secondary products and are often used by smaller companies to protect a company’s main products.
• Budgets still play an important role in such patents.
• One or two continuations may be sequentially filed to expand claim protection or two keep a “child” of the patent alive (so the owner is free to file additional claims to cover competitor’s products or future products).
• Typically, U.S. companies will not file in other countries because of the costs of such foreign filings.  If foreign filing is contemplated, PCT applications are typically filed with U.S. style claims.

Level 3 – “Bet the company” Patents

• These patents protect a company’s key technology.
• They tend to be longer, have more claims, and more expensive.
• Often the inventors and others will meet to “design around” the claims of such patents.  The “design” around solutions are then either included in the patent application or in other applications.
• Such patents often start an extensive family tree of related patents where “continuation-in-part” and continuation patents are filed and prosecuted simultaneously.
• Office Action Rejections are typically handled by face to face interviews to reduce prosecution history estoppel arguments in litigation.
• If foreign filing is desired, the U.S. claims and/or specification are redrafted to better conform to the patent laws of different jurisdictions.
• Oil companies, medical device companies, and drug companies often develop patents of Level 3 quality.

Level 4 – “Non-Practicing Entity” or NPE Patents

• NPE are licensing only entities.  The advantage of an NPE model is that the NPE cannot be counter-sued for infringing patents in a larger company because the NPE does not produce its own products or services.
• Although some NPE’s can readily license their technology, many NPEs must use the courts to enforce their licenses.  Consequently, NPEs assume all of their patents will be litigated.
• Because most of the portfolio may be litigated, NPEs often employ prosecution procedures designed to make defending against the patent very expensive.  For instance, rather than modify one claim, NPE’s typically delete and replace 100 claims at a time.
• NPEs typically employ a combination of Level 1 and Level 3 patents because most of their patents will see litigation.  Thus, a large percentage of their patents must be “litigation ready.”
• NPEs will file many more continuations and more claims.  Often one patent specification will result 10 to 50 patents involving thousands of claims.
• NPEs usually do not file foreign because of the expense and limited recovery in foreign jurisdictions.

In recent years, NPEs have been successful at asserting “junk” patents against many businesses.  These businesses have lobbied both the White House and Congress to change the patent law.  As is usually the case, Congress will probably hurt legitimate small business owners in the process in the same way medical malpractice laws prevented patients with actual injuries from fully recovering.