The Key to Powerful Patents for Cyber (and All) Companies

Why do some companies have reputations for developing powerful patents, while others don’t? Why can some companies command millions of dollars in royalties from their patents, while for other companies, patents are merely an expense line on their balance sheet? And why is it that the patents of some companies scare competitors away, while patents of other companies do not even make competitors flinch? 

The answer is that all patents are not created equal. To understand why, and to understand how you, as a corporate executive, can turn your patent program into a valuation builder, let’s consider a hypothetical cybertech company named Cyber-sode. Cyber-sode solves the problem of viruses and worms entering through unapproved ports. Avishai, the CTO, is brilliant, and came up with an elegant solution to this problem:  maintain an approved list of ports, and determine the presence of suspicious activity by examining dataflow through ports not on the approved list. Knowing that sophisticated investors always ask about patents, Guy, the CEO, told Avishai to meet with Moti, the company’s patent attorney. So Avishai obliged and spoke to Moti, a very bright patent attorney who was able to stand toe-to-toe with Avishai. Moti wrote a fantastically detailed patent.  Just as Avishai described, Moti defined the invention in terms of a series of switches, routers, hubs and bridges.  Two years later, the patent issued, and the company threw a party celebrating Avishai’s achievement.  But no one recognized that the patent is horrible. Why? Because there are many ways to get to the same solution without the arrangement of switches, routers, hubs and bridges required by the patent. A competitor who likes Cyber-sode’s solution, will say, “Great idea!  I can get to the same result with another arrangement of components. And when I do, I will not have to worry about Cyber-sode’s patent.” 

What did Cyber-sode do wrong? It pursued a technical patent rather than a conceptual patent. By focusing on Avishai’s particular technical solution, Moti left open the possibility that a competitor could get to the same result without using that particular technical solution.  It’s really not Moti’s fault. He did what Avishai told him to do. The problem is that Avishai thinks like an engineer, and therefore he guided Moti to prepare a technical patent that ended up protecting one narrow technical solution. 

What should Cyber-sode have done differently? It should have engaged in strategic patent planning to figure out how to block competitors from stealing a revenue stream as opposed to blocking competitors from stealing a particular technical solution. Guy, the CEO, or someone else with a strong business head should have been involved, along with a representative of Marketing. Had Cyber-sode adopted a business, rather than technical approach to its patenting, it would have realized that instead of patenting an arrangement of switches, routers, hubs and bridges, it should have more generally patented a system that uses an approved port list to check for suspicious activity on unapproved ports. Such a patent would have blocked everyone from using the conceptual solution, regardless of the technical arrangement of components. 

 If you are thinking to yourself, “that’s silly,” no one can get a patent that broad, think again. That’s just the patent Hewlett Packard received. Check it out:  U.S. Patent  No. 9,521,154. 

Unfortunately, according to many analysts, Cyber-sode’s mistake is repeated more than 90% of the time across all companies, regardless of technology. Business strategy run by business people, goes in one direction; and patenting, led by techies, goes in another. Then, when it comes time to use the patents to stope competitors, the patents don’t work. To be successful with patents, companies must adopt a business approach to patenting. Before beginning to write patents, companies should first identify the business goals that the patents need to accomplish. Then, the strategy for each prospective patent should be tested to determine the likelihood that such a patent will block competitors. Business people need to be involved in this process together with a patent strategist. If a strategy is likely to achieve the business goal, the patent should be pursued. If it is not likely to achieve the goal—no matter how clever the invention—the patent should not be pursued.  With global patent costs in the neighborhood of $200,000 per patent family over the family’s life, companies need to be more cautious in their approach to patenting. Otherwise, as we often see, companies have huge patent expenses with not much to show for it. As one Israeli CEO recently said, “it’s taken me a long time to come to this realization, but when it comes to patents, either do it right, or don’t do it at all.”