Author Archives: Jackie Hutter, IP Strategist

About Jackie Hutter, IP Strategist

Jackie Hutter, named one of the Top Global IP Strategists by IAM Magazine in each year since 2009, has almost 20 years experience advising innovation-driven corporations, investors and universities on how to maximize intangible asset value. As an IP Strategist, Jackie does not just "get" IP, she makes sure her clients only get IP that makes them money. Jackie has established this blog to provide forward-thinking business and legal professionals with strategic information to enable them to identify, capture, protect and exploit their organization's intangible asset value. As the CEO of a startup technology company, Jackie also understands the IP and legal needs of small and emerging companies and works frequently in an in-house counsel role for such clients. Jackie lives in Decatur, Georgia, in a groovy Mid-Century modern house with her husband, 2 daughters and far too many pets.

Need Broad Patents Fast? Try This.

Sieze the day: take your patent allowance!That title got your attention, didn’t it? It was meant to. After another successful round of patent application examinations for several clients in the last year, I thought others would like access to my proven patent acquisition methodology. Certainly, there’s a lot more than I can include in this post, and what is presented here should be considered to be only a high level introduction to my process. Moreover, every client requires focused attention to generate the desired patent protection, and not every business scenario mandates this comprehensive approach. But, for those situations where company leadership determines that strong patent protection is a key to achieving the desired business outcomes from investment in innovative products and technology, this methodology is not only recommended, it is required for success. Put simply, if you do the hard work on the front end as outlined in this post, it is more likely that you will be able to obtain patent protection that “makes it cheaper to go through you than around you.”

1)     Forget about the Invention. Focus on the Customer

The first thing a patent attorney asks a client is “what did you invent?” You know who doesn’t care about your invention? Your customer. It follows that meaningful patent protection must focus on your customer, that is, the problem you are solving for them. Once you have validated that customers will pay for your product, you can expect that your competitors will try to pinch those customers if there is enough profit available to them. If your protection scheme focuses on only the features of your product, that is, “the invention”—as most patents do—your competitors could be able to provide a non-infringing product to your customers that provides the same benefits, likely at a lower price. If you focus protection on the benefits provided by your product–which is the reason your customers buy the product in the first place–your competitors will not be able to provide those same benefits to the consumer without infringing your patent claims. Certainly, the invention (or “product”) matters when confirming your entitlement to broad claims. Focus on obtaining claims that encompass the benefits can nonetheless ensure that the patent protection obtained will cover any and all product variations that provide the customer value proposition. (I write in detail about a highly effective execution of this claiming technique for a familiar consumer product here.) Continue reading

Value-Enhancing Patent Prosecution Strategies (Part 1 of 4)

easy pictureIn my role as the IP Strategist for a number of companies that do not employ in-house patent counsel, I am charged with making sure that my clients’ patenting efforts are in tune with their desired business outcomes. This means that instead of focusing on the drafting and prosecuting of patent applications that form the basis of most patent attorneys’ practices, I work at the front end of the patenting process to design patent strategies that will enhance my clients’ business value first and foremost. When alignment is created with business goals, subsequent patenting efforts will necessarily result in protection that matters to the value of the company. In this regard, I have a number of tools in my “Patent Strategy Toolbox” that I deploy regularly when developing patent prosecution recommendations. Notably, when I mention these tools to new clients, I find that few have been informed about these options by their regular patent counsel. This made me realize that these tools may not be used as often as I think is warranted in many situations. In the interest of spreading the word about these potentially value enhancing patent strategies, I will provide readers with a list of four available, but often infrequently used, patent procedures in this and subsequent posts.

Below is the first of these suggestions, with the rest to follow in coming weeks.

1.      TrackOne Prioritized Examination in US the Patent Office (aka “accelerated prosecution” to obtain issuance of US utility patent in 1 year or less)

Accelerated “TrackOne” prioritized examination for utility application filings in the US has been available for a few years. The limited knowledge my new clients have about this procedure makes it seem like it is a well-kept secret to many patent seekers. This option needs to be better publicized because, for many companies, quick patent issuance can greatly decrease the risks associated with launching a new product or technology innovation.

I first found out about the TrackOne procedure shortly after it was initiated by the US Patent Office from a group of very senior corporate IP lawyer peers with whom I regularly network. Uniformly, these practitioners were enthusiastic about the new responsiveness of the US patent examiner corps to their patent application filings. Of course, one has to pay extra in exchange for a speedy examination, but, for some of their cases, my peers thought the procedure was well worth the premium, which is currently an extra $4000 for large companies, and $2000 for small companies in addition to the usual government patent filing fees.

For established companies like the ones my peers work at, the ability to obtain an issued patent in less than 1 year after filing instead of the typical 2-4 years allowed them to delay utility filings until the product to be protected by patents was close to market introduction. This was in contrast to the usual procedure in which a patent application is filed early in the product development cycle and therefore well in advance of a product’s introduction, which often means that the claims of the resulting patent do not match the final product design. By strategically delaying filing until closer to product go-to-market, these IP counsel could improve the odds that their issued patents actually covered the products that their companies were selling which, in turn, allowed them to reduce the risks that their competitors would be able to knock off their successful product introductions.

Since we who have been toiling in the US patent trenches for years are almost never pleased with the US Patent Office, my interest was piqued, and I decided to try the TrackOne procedure for a startup client where accelerated prosecution seemed warranted. This client, for which I work as part-time Chief IP Counsel, is developing disruptive imaging technology. While the company has obtained a good amount of seed funding, investors still view them as a risky proposition because the company is in technology development mode and is pre-revenue, and will be for some time. Typically, applications filed for startups like this client will sit awaiting examination for several years and, as such, the pending applications will have little influence on the startup’s valuation because any patent rights covering the subject technology will remain hypothetical until issuance. My client sought alternatives to the often-interminable wait times associated with obtaining patent protection in the US.

When filing the company’s “foundational” patent application—that is, the application intended to set out much of the ownership for this startup’s technical differentiation—I suggested that we choose TrackOne prioritized prosecution to speed up the examination process and, hopefully, the issuance of the company’s first patent. Using the TrackOne process, we indeed achieved a patent issuance in less than a year from the filing date of the utility application. Moreover, within about six months of initial application filing, we also could predict with good probability the scope of the issued patent, a fact that reduced uncertainty for my client, as well as for its investors. In short, our selection of the TrackOne process as a prosecution strategy paid off, and my client now holds broad patent protection to the technology on which its upcoming product offerings will be based. This issued patent will also now be incorporated into the company’s valuation, with the expected result being that upcoming investment terms will be more favorable to the company than could be expected for a pre-revenue technology startup.

The additional cost associated with seeking TrackOne examination can be a deterrent to selection of this procedure. Certainly, it would not make sense to go this route for all filings at most companies. I tell clients “most patents don’t matter to business, but when they matter, they matter a lot.” To this end, the TrackOne process should only be used strategically when the exclusivity provided by broad patent protection will add meaningfully to the bottom line. By “add meaningfully to the bottom line,” the issued patent claims should be directly aligned with a desired business outcome. For established companies, this desired business outcome may be to prevent competitors from providing consumers with a non-infringing substitute product. For startups that have not yet introduced a product (or that are in the early stages of doing so), the desired business outcome may be to obtain the higher valuation that is often associated with having an issued patent covering the company’s product or technology offering.

I also let clients know that the cost differential between TrackOne and regular utility patent prosecution may be overstated. Using the time-regulated TrackOne procedure, I have seen first office actions from examiners that appear better-reasoned, and directed toward concluding prosecution succinctly. This means that multiple back and forth communications between the patent attorney and examiner may be less likely, which will, in turn, reduce the overall cost of prosecution. The fee reductions resulting from lesser work for the attorney and fewer patent office post-filing costs (e.g., RCE, appeal, and continuation practice) could outweigh the initial extra TrackOne filing costs. Moreover, the “time value” of an issued patent versus a pending application may make it worthwhile to pay the extra filing costs.

Anecdotally, when reviewing various file histories for clients that hire me to evaluate prior art, I see that a number of startups engaging lawyers based in Silicon Valley and the Pacific Northwest appear to be selecting TrackOne prioritized examination more often than those companies that use lawyers located elsewhere. While this is certainly not a scientific sample, it may be that the accelerated TrackOne prosecution option is gaining traction in practice locations more known for being less conservative in approach. Of course, “your mileage may vary” with the value of TrackOne prosecution for your patents, and any company interested in this option should be fully apprised of the cost/benefit aspects for its own situations.

Continue reading

UPDATE: Lack of Patent Strategic Focus Results in $100’s Millions in Lost Value

invalid patentLast week, an en banc Federal Circuit (that is, the majority of the sitting judges, not just the usual three judge panel), rendered a decision that saved the patent that keeps the ANGIOMAX(R) product from generic competition. In short, the Federal Circuit saved this successful blood thinner medicine from generic competition and, in so doing, saved the proverbial “bacon” of The Medicines Company. Since I wrote about this case about a year ago when the ANGIOMAX patent was invalidated by a three judge Federal Circuit panel for violating the US “on sale bar,” I thought it prudent to update the post with this new information.

The purpose of this post is not to summarize the new “on sale bar” rule. Many law firms and commentators have already done so. A good summary can be found here. In short, the law is now more clear as to what activity can constitute an “on sale bar” that can prevent the underlying invention from being successfully patented.

Instead, this post is directed toward the fact that the ANGIOMAX story retains value for those seeking to generate best practices–or to avoid “worst practices–in formulating and executing their company’s IP Strategy. In this regard, the ruling is, no doubt, great for The Medicines Company, but, put simply, their management still should be held accountable for the royal screw up that resulted in the litigation being needed in the first place. The cost of the litigation was most probably in the $10’s of millions, and crucial employees likely spent considerable time on supporting the litigation, as opposed to generating revenue and creating new innovations. Moreover, the business uncertainties associated with such “bet the company” litigation unquestionably affected the overall value of the The Medicines Company, even though the crucial patent was ultimately upheld. If I was a shareholder, I would expect that someone would be taken to task for such managerial malfeasance. (This may indeed have been done because a new board chair was named shortly after last year’s invalidation decision was rendered, and it appears that, below the CEO level, several new persons were named to management or moved to new positions since earlier this year.)

The fact that the ANGIOMAX patent was upheld due to a clarification–and arguably a significant modification–in the law of patents, does not change the premise of the original post: if your company’s value is based in significant part on protection of innovative products with patents, you must have a strategic in-house IP lawyer minding the store.

First, as a former patent litigator, I can say with authority, if you are engaging in litigation to preserve a patent that is a significant source of your corporate value, you have already lost (unless, of course, you are a patent litigation professional). Indeed, this is like fighting a fire that is jeopardizing your house when the reason for the conflagration is that you did not fix the faulty wiring when you had the chance. Arguing that a patent is invalid is by definition defensive, and is the least best option for a company like The Medicines Company that has most of its value riding on strong patent coverage.

Second, the ANGIOMAX case is the exception that nonetheless proves the rule that IP Strategy should be a process embedded in regular corporate functions, as opposed to being a periodic event engaged in on occasion by management. The Medicines Company’s key patent was saved only by the exceedingly rare event of its lawyers’ successfully arguing before the Federal Circuit that the existing legal rule that rendered its patent invalid should be changed. This rare event was precipitated only by the even more rare event (i.e., about 0.1% of all cases disposed by the court) of an en banc ruling by the Federal Circuit. But for all of the stars aligning to provide this expensive and highly improbable result, ANGIOMAX would now be subject to generic competition.

Lastly, and this is a statement that is all-too-often relevant for those seeking patents, the fact that your patent lawyers have to parse the dates associated with your company’s sale-related activities means that you by definition not incorporating IP strategy into your corporate functions. As a result, you are likely to make an error that can affect patentability or, at a minimum, you will be wasting money and expending corporate human resources trying to save a patent having questionable validity. This is poor management. Full stop.

Congratulations are certainly in order for The Medicines Company, its lawyers, and its shareholders. Those seeking to create and maximize value from product innovations should nonetheless consider the litigation story of The Medicines Company to be a cautionary tale of what happens when a patent-centric company fails to mind its patent store.

ORIGINAL POST FOLLOWS BELOW (posted July 20, 2015)

As an IP Strategist, I am fascinated by stories from which declining business fortunes can be traced directly to failed patent strategies. Often, the failures can be traced to patent attorney errors that limit the effectiveness of a company’s patent to prevent competitive knock-offs, but, often, the problems can be traced to the lack of accountability for IP strategy within an organization. For those companies where IP is a primary driver of competitive advantage, the absence of someone who “owns” the job of making sure IP is properly captured and protected can result in unrecoverable errors that opens the innovator to unwelcome competition. In this regard, the recent loss of patent protection to a popular drug product should serve as a useful case study on why the C-suites of innovative companies should consider strategic in-house IP counseling to be a mandatory aspect of their business strategy.

Earlier this month, the Federal Circuit effectively eviscerated the revenue prospects for a successful pharmaceutical company when the court found the two patents covering the popular blood clotting treatment Angiomax(R) invalid. Angiomax, which had U.S. sales of $599.5 million for The Medicines Company in 2014, is the brand name of a drug called “bivalirudin” that is used to treat blood clots in people with severe chest pain or who are undergoing angioplasty to open blocked arteries. While the company has other drugs in the market, Angiomax is the lead product for the company, accounting for 80% of the company’s sales in 2013. Angiomax has been a blockbuster drug for the company and, prior to this month’s court decision, the company was expected to hold patent exclusivity for several more years. The Federal Circuit decision opened the way for generic equivalents to enter the market almost immediately after the decision, and it can be expected that The Medicines Company’s revenues from Angiomax will decline precipitously in the near future.

Those reviewing the court’s decision will likely be quickly lost in the weeds as to why the Angiomax patents were found invalid. Briefly, the issue addressed by the court was whether the facts showed that the methods and compositions claimed in the patents were “on sale” more than one year prior to the November 2008 filing date. The issue arose because The Medicines Company paid a contract manufacturer to prepare several batches of product as early as October 2006. Notably, the batches prepared by the contract manufacturer included a newly identified efficient mixing procedure that not only provided an improved manufacturing process, but which also generated a new composition. Both this method and the composition obtained from the method–a more pure form of the active ingredient of Angiomax–became the subject of the November 2008 patent applications. While the first patents for Angiomax were set to expire in June 2015, the later-filed patents covering the improvements to the method of making and the more pure product would extend patent exclusivity to The Medicines Company for several more years. However, in reviewing the circumstances of The Medicine Company’s commercial interplay with its contract manufacturer, the Federal Circuit found that the method and compounds claimed in the two patents had, indeed, been on sale prior to the “critical date.”

The Angiomax case gives rise to facts that patent lawyers find fascinating to relate to clients: there will no doubt be many “Urgent Practice Updates” from outside counsel cautioning their clients about the potential perils of dealing with contract manufacturers when patent filing is a possibility. However, this inevitable focus on legal issues misses the crux of the business issues that gave rise to the invalidity decision in the first place. Indeed, if a client and her outside counsel are parsing the details of whether she can file a patent by evaluating the activities conducted on more than one year prior to the patent application filing date, a mistake was already made because the patent filing issues were not kept visible while business was being conducted at the company. We can see this by further examining the facts of the Angiomax case.

In reviewing the trial court decision and various pleadings in addition to the Federal Circuit decision, it appears that The Medicines Company’s patent woes can be traced directly to the fact that it appears that no one in the company held responsibility for ensuring that IP protection followed along with other activities. Namely, when the manufacturing team needed to find out the reasons for batch failures in 2006, which were solved by bringing in a consultant, no mechanism existed for bringing the discovery of the improved process and composition to the attention of IP counsel who could then evaluate whether patent applications should be filed to protect these improvement. It was not until two or so years after this discovery did anyone at the company appear to realize the significance of the process improvement efforts to potentially extending the patent exclusivity for Angiomax. In short, it appears that everyone was focused on doing their respective jobs of getting salable product out the door in the face of critical manufacturing problems, but it was nobody’s job to review whether these efforts should be patented to enhance The Medicines Company’s patent exclusivity for its blockbuster product.

Notably, it likely would not have been enough for outside counsel to sit down with management on a regular basis to say something along the lines of “have you invented anything new?” because, at the time of the manufacturing process improvements, the focus was on meeting the supply demands for Angiomax.  In short, because no one “owned” the role of IP strategy within the company, it was the epitome of “out of sight, out of mind.” While I am, of course, speculating on what happened, I have seen this situation enough times to expect that only when The Medicines Company’s management realized that the 2006 improvement efforts could extend its patent exclusivity for Angiomax did they seek to obtain a patent as a reaction to a shortening patent term. And, as the Federal Circuit ruled, they waited too long to do so. If the team had included someone whose job it was to proactively address IP strategy on an ongoing basis, I contend that person would have either held the legal knowledge to recognize that patent protection was available or it would have been incumbent on her to raise the issue with outside counsel. In either circumstance, it is more probable that The Medicines Company would have filed for patent protection in a timely manner and the Angiomax patents would remain valid today.

It should be noted that this does not appear to be a situation where outside counsel failed to obtain adequate patent protection. To the contrary, once The Medicines Company decided to file for patent protection in late 2008, “the damage done been did,” and all outside counsel could do was “damage control” to try to convince the courts that its client was entitled to an “exception” to the rule that one has to file for patent protection within one year of the claimed invention being “on sale.” The Medicines Company hired excellent (and expensive) outside counsel to save it from its bad decisions, to no avail. (As an aside, the trial record indicates that The Medicines Company’s patent counsel did not disclose the sale activity to the Patent Office during prosecution of the Angiomax patents. Thus, I would expect that the company’s outside counsel did not know about the invalidating activity until litigation ensued.”) Even if the Angiomax patents had been upheld, at a minimum, it can be said that the vast expense and business uncertainty resulting from several years of patent litigation could have been avoided if The Medicines Company had prioritized IP strategy within the organization in 2006.

Again, while I am speculating, I expect that management of The Medicines Company did not think that the size of its patent portfolio justified hiring of a full-time in-house patent counsel, and they were probably correct.  However, the fact that the primary source of the company’s revenue could be directly attributed to that patent portfolio, mandated that an in-house resource be assigned to manage and be accountable for IP strategy, at least on a part-time basis.

Fortunately for small- and mid-sized companies, there are now innovative practice models where experienced in-house counsel can provide business-focused IP counsel on an as-needed basis. I represent several innovative companies that require strategic IP advice on an ongoing basis. Patent GC is another of these practice models. While this is certainly “the fox guarding the hen house” advice, I strongly recommend that management of companies where revenue is directly attributable to obtaining adequate patent protection investigate engagement of strategic in-house counsel advice like us to better ensure that their IP strategies are sufficient to create durable competitive advantage for their businesses. At a minimum, C-suite executives at small to mid-sized companies should look to the declining fortunes of The Medicines Company to develop actionable approaches to elevating the importance of IP strategy within their businesses.

(Note: This case is not the only problem that The Medicines Company has faced with Angiomax’s patent protection. While management now seeks to blame its previous counsel for its patent woes, certainly the lack of in-house IP strategy influenced these other situations, also.)

IP Strategy is Increasing Focus at Innovative Companies: Here’s Why

Introducing a new model for client focused IP legal services.

IP Strategy is increasingly adopted by innovative companies today.

After more than 8 years, I can report that IP Strategy is an increasing focus at innovative companies, and there is a solid reason why this is so. By way of background, for many years, I have been part of a small minority of IP experts who advocate that companies desiring to maximize the value of their IP investments re-think the way they seek and obtain patents. In short, I and my IP Strategist peers urge companies to wrest control of their “IP destiny” from their legal service providers who have traditionally been seen as the primary drivers of the patenting process for their clients. Of course, readers of my regular ruminations know that my strongly held view is that “the only person who needs a patent is a patent attorney,” and that, even for those companies for which patents are critically necessary, very few actually obtain patent protection that meaningfully protects their innovations. But, my view has remained muted by the vast marketing resources wielded by traditional IP law firms. Indeed, a fellow IP Strategist friend of mine at a large consumer hardware company calls these folks “the legal industrial complex.” This means that the “you need a patent” message remains the predominant framework for most potential patentees today today.

Fortunately, for those like me who believe that the traditional IP legal service model is broken and is ripe for disruption, there appears to be change emerging on the horizon. In my own IP Strategy consulting practice and in conversations with my IP Strategist peers, I have increasingly seen and heard of situations where innovative companies are seeking a second opinion over that of their primary patent counsel and, in some situations, are even seeking a first opinion from experts like me before they move forward with their IP procurement efforts. Continue reading

Product Companies Must Modify Patent Strategy When Adopting Innovation as Business Model

DEVELOPMENT-INNOVATION road sign

Product innovation requires a new patenting strategy.

I recently finished an IP Strategy engagement with major consumer products corporation, where I interfaced with the head of New Product Development and Innovation Strategy. This company is embarking on a major shift in the way it brings products to market. In short, the company is transitioning from one that introduces new products with incremental improvements into the market on a regular basis, to one that focuses more on innovation. For this client, this strategy will mean that a significant portion of its product development efforts will be focused on solving unmet and identifying emerging customer needs, with the ultimate goal of introducing truly innovative consumer products that will be successful in the marketplace.

I am sure that my client’s new products will be found to be highly desirable to their consumers: the team is highly competent in the processes that need to be implemented in order to successfully execute innovation-based product development. The missing piece, and the reason that I was brought in, is for the team to possess actionable steps for bringing the company’s patent strategy into alignment with its new innovative product development strategy. That is, the innovation lead realizes that the shift to from products that include incremental changes to ones that incorporate truly innovative features will also require substantial modifications to the way the company generates patent protection.

Notably, this company has hundreds of patents in its portfolio, the result of its filing of several dozen patents a year for over recent years. Management currently has a continued expectation is that the IP team will continue to crank out patent applications at the same rate. Certainly, generating a high volume of patents is much easier when a company creates a high volume of new products on a regular basis. As long as the new product is novel and unobvious, a patent can be obtained. Creating new products from innovation programs is a much different process, however. This means that, in conjunction with adoption of innovation as a business strategy, my client must rethink its understanding that more patents equal more value: patents resulting from innovation efforts are likely to be fewer, but, if done correctly, they will be more “meaningful.” Continue reading

10 Key IP Strategy Insights for Innovative Companies for 2016 and Beyond

different-1163255-1278x903As 2016 begins, I am entering my 8th year(!) of writing about IP strategy insights from a business value creation perspective, both here on my IPMaximizerBlog.com and, more recently, on LinkedIn. While there were quite a few IP lawyers writing blogs in 2008, no one else was then writing about IP strategy. Today, there are even more IP lawyers writing blogs about IP law, but still almost none writing that address IP strategy topics that are meaningful outside of the IP monetization and large IP portfolio context. Over the years, it has sometimes seemed like I was the proverbial “lone voice in the wilderness” who speaks frankly (or as one of my regular readers said to me last year “bravely”) about how innovators can take charge of their IP strategy to create value and reduce risk. But I don’t feel this way any longer: in the last year, the growth of my consulting practice, as well as the much larger audience for my periodic online ruminations, has demonstrated that my message about how IP strategy can not only protect, but also maximize, the fortunes of innovative organizations is becoming embedded in business culture.

Since there is probably no one (other than my Mother) who has read all of my posts, I thought the New Year signaled a good time to consolidate some of the key principles under-girding my process of using IP Strategy to create and maximize business value in innovative organizations. I’d also like to hear comments from readers about whether it would be valuable for me to expand these concepts into an e-book format for those seeking to learn more. So, without further ado, here’s my 10 Key IP Strategy Insights for Innovative Companies Seeking to Maximize Business Value in 2016 and Beyond:

1)Rethink what patents should “protect:”  If you are an innovator, the customer solution you provide is far more important than the product you are making. Full stop. This means that if you call a patent attorney before you have defined your invention in terms of the value you are providing to customers, the patent you obtain will likely be too narrow to protect your company’s value proposition from pinching by your competitors. This not only wastes resources, a false sense of security will arise. I can’t tell you the number of times I have had to tell people that the patent upon which good money was spent actually did not provide adequate protection. One example of this situation is discussed in this post. Critically, your competitors do not care about your product, they care about your customers. Your investment in technology and customer development may largely be for the benefit of competitors if your patent rights cover only your product. In short, you must ensure that your patent covers not just yourinvention, but also your innovation.

2) Rethink the people driving your company’s patenting efforts: The typical situation where the technical staff is the primary contact with the patent attorney is almost certainly guaranteed to result in a patent that covers the invention, but misses all or part of the innovation. By “innovation,” I mean the customer solution addressed by the that drives customers to buy your product. It is often forgotten that a patent is nothing more than the government’s acknowledgement that the invention claimed meets the legal requirements for patentability. The grant of a patent is undoubtedly a validation of skill for a technical person, as I can attest to as a named inventor on a patent that was granted from my work as a chemist many years ago. (I got a nice check, too!) But, a granted patent says nothing about the underlying business value of the claimed invention. The only way to ensure that a granted patent holds business value is to incorporate the business team into the patenting process at all stages. Alternatively, companies that are “best in class” in IP Strategy have IP specialists (who may or may not be IP attorneys) who report directly into the business group to ensure that any patenting decisions are made with a proper emphasis on business value, not just technical merit. The technical team certainly holds a significant role in any company’s patenting, but business relevance of their technical insights must lead their efforts. This means that the business team must actively engage with the patenting process at every stage. Heck, that’s why they call it “IP Strategy“, right?! Continue reading

“IP Strategy” is Meaningless without Desired Business Outcomes

different-1163255-1278x903

Desired business outcomes dictate a company’s IP Strategy.

“You can’t sell me IP Strategy, Jackie,” one of my top clients said to me recently when I sat down with him to conduct customer discovery for my IP Strategy practice. This client, a successful serial entrepreneur whose company has engaged me as “fractional Chief IP Counsel” for the last 1.5 years, swears by the services I provide to him–so much so, that he is a primary source of startup entrepreneur referrals that I obtain today. I was thus surprised that he didn’t see my value as providing him with “IP Strategy,” but as something else entirely. He said: “If I had to go on the record of why I value your expertise, it’s because IP is important to my exit, and you look at IP differently than any other lawyer I have known. I know you’re focused on creating value for my startup, so I want to keep you around.” This was great to hear, but I did not quite know what to do with this information in relation to marketing my IP Strategy practice. (Which some of you might realize is an all-too-common aspect of customer discovery.)

When I sat down with another client, the CEO of an established security hardware company, he told me that, if pressed, he would not be able to articulate exactly why “IP Strategy” was a missing element of his existing management team. Nonetheless, this CEO client has embarked upon a plan to incorporate me into his regular innovationstrategy meetings so that I gain visibility to ongoing product development efforts. He knows that such visibility is necessary to ensure that his company does not miss any opportunities to protect the products that result from execution of the company’s multi-year innovation road map. As I wrote about previously, this client sees that having an IP Strategy expert like me involved with his company is crucial to his reducing the risk that his shareholders will not obtain the promised returns that he has projected will follow from his company’s investments in innovation and product development. But, again, it was hard to know what to do with this information when trying to develop a coherent marketing strategy for my IP Strategy consulting practice.

These are only two examples of the disparate–and ostensibly irreconcilable–answers that I obtained when I asked my clients how my IP Strategy expertise brings value to their respective companies. Other clients gave similarly challenging to interpret answers to the “what does IP Strategy mean to you?” question. In the aggregate, although each of the people–all sophisticated business professionals–I spoke to had a general understanding of why they sought out my specific expertise (especially in comparison to hiring a traditional IP lawyer), none could clearly describe exactly why they felt the way they did. It would not be overstating things to say that I was “flummoxed” by the situation that my customer discovery efforts put me in! How was I supposed to improve the marketing of my IP Strategy practice when even my loyalest clients could not tell me why I mattered to their business?!

As I worked to clear of my confusion so that I could continue with the reconfiguration of my IP Strategy practice marketing efforts, I spoke with a close friend who is in an analogous professional services business (i.e., business valuation). He knew immediately the answer to my dilemma:

“You don’t sell IP Strategy. You sell business outcomes. Full stop.”  Continue reading

Why Business Fails to Generate Patenting Strategies that Protect Innovation Value & How to Make It Easier

easy pictureBusiness leaders often find the decision of whether to obtain patent protection for their company’s innovations to be difficult. Of course, conventional wisdom, not to mention legions of patent attorneys, assert that patents are “important” to “protect” one’s business. In my experience, however, few business people can clearly articulate specifically why and to what extent patents can and will create real financial value for their business. This means that, in many companies, the decision to obtain (or not obtain) patent protection in a particular situation comes down to evaluation of anecdotal information from which a “business judgment” is formulated. In my view, when based only on anecdotes, as opposed to real data, such “business judgment” effectively amounts to nothing more than a “belief system” in which patents are viewed as relevant or irrelevant to the business over time.

As an example of the prevalence of patent-related anecdotes that bombard business people, of course, we can point to the many patent attorneys that you and I know who are in the business of getting patents for clients. So, are patents important? Of course–for their businesses! Less facetiously, each of us likely meets business people who have strong opinions about patents and who will provide their advice to whomever seeks their advice. A successful Atlanta area entrepreneur who makes video hardware expertly asserts frequently to other entrepreneurs that “patents are not important for startups.” And, that’s true–for his business because of a number of reasons that keep competitors away from his business, including a limited number of customers for his unique product offering and his company’s focus on specialized sales and technical service teams that competitors have yet to mirror. Other entrepreneurs I meet are just as adamant about how patents are imperative–for their own businesses. Many of these business people have expended large sums to acquire seemingly robust patent portfolios. Nonetheless, when I ask them to specify how and why their portfolios are necessary for them to meet their business goals, almost never can they align their patenting efforts with a business case of how patents bolstered their company’s success.

Interestingly, as I wrote about in this post about how $100’s of millions were destroyed from lack of IP strategy, rarely is there accountability for business failures that, in retrospect, can be directly attributed to management errors in patent decisions. It follows that the decisions made by business leaders to obtain or not obtain a patent may be right one or wrong, but, unlike other areas of business management, it is doubtful that anyone can learn from past patenting mistakes because no one is collecting usable data that can be used to improve future patenting decisions.

Surely, this can’t be an acceptable proposition: the first axiom of business is that “if it can’t be measured, it can’t be managed.” So, if no one is measuring the results of patenting decisions in the aggregate, we can clearly see why patenting decisions are often not based on data but, rather, on anecdotes.

Along these lines, in a must-read recent article in IAM Magazine, Dr. Chris Donegan posits that the reason that IP is frequently ignored in financial analysis is because it is difficult for non-specialists to understand. While Dr. Donegan is talking about IP broadly in the context of corporate value drivers, I think his mention of “difficulty bias” applies specifically to patent decision-making, also. Put simply, the complexities of patents make it easy for busy business folks to ignore what they do not understand. Certainly, if information about patenting decisions is not collected, no data can be generated for later use by either financial analysts or, for that matter, by businesses in general.

In addition to these failure on the business side to capture relevant data on patenting decisions after the fact, I would add that we patent attorneys are often not skilled in framing patents in the context of business relevance; instead, we often wholly ignore the interplay of our clients’ business issues and patents to focus on the legal aspects of our efforts. This could be either because, as “merely” patent experts, we are not given access to our clients’ business information or, perhaps, for some of my IP colleagues, business is not in our wheelhouse of expertise. In either case, our clients’ business interests likely bear the brunt of the downsides of not understanding how patent decisions could make or break their company’s financial projections. That is, as with business, patent experts are almost never held accountable for failing to generate broad patent rights for their clients.

Of course, the answer is for business leaders to not, in Dr. Donegan’s terms, “put their head in the sand” and ignore substantive analysis when considering whether and to what extent patents are relevant to their company’s respective business fortunes. But, frankly, it needs to be easier for non-patent experts to gather the information they need short of their going to sitting for the Patent Bar Exam.

In the interest of starting a conversation with the goal of making patenting decisions more accessible to business leaders, I submit that there is a somewhat “easy” way to frame patenting decisions in a business context so as to enable businesses to develop and execute on patent strategies that can protect innovation investment. To this end, I think that a simple, yet potentially robust, set of questions can be used by business people when analyzing patent issues in their decision-making.

Before we get to the “easy” framework from which to create patent value, let’s lay down a few ground rules, each of which should be the subject of its own blog post. First, unless you are a patent attorney, we need to all agree that patents do not have value just because they exist. We also need to also agree that just about any company that sells a product that is the result of real innovation may at some time be able to generate more corporate value and reduce downside risk by creating an IP strategy that includes one or more patents. Importantly, however, this innovative company must generate patents that effectively carve out a legally enforceable (or monetizable) competitive advantage that is durable. Lastly, patenting decisions must be made part of ongoing business processes, as opposed to being an event. This means that while it may not make business sense to obtain a patent today, you nonetheless need to incorporate patenting decisions into your overall business strategy on an ongoing basis.

Now that we are the same page with these ground rules, the easy question that business leaders need to ask is:  “Are there customers for the product(s) emanating from my company’s innovation investment and, if so, is there a real risk that my competitors will be able to take these customers from me?”

If the answer to the above queries is “yes,” a real risk exists that your company will not obtain the projected ROI on innovation unless there is a way to legally prevent your customers from being pinched. This means that business leaders responsible for ensure that revenue projections from innovation investment are obtained must evaluate whether these customers can be protected by generating patent protection for the products emanating from innovation activity. But, the inquiry doesn’t stop here: real protection of those customers and revenue streams means that patents have to cover more than the product being sold. Rather, to the extent possible, patents must cover the reason customers buy the product in the first place.

Patents can be a primary driver of risk reduction (and value capture) if, and only if, you can obtain patents with sufficient scope to effectively prevent your competitors from providing the same value to your customers. This means that patents covering the value proposition, and not just your product, are the “gold standard” to obtain. Business must then seek to obtain patents that broadly address the functional benefits of the product resulting from innovation investment. I describe this in a previous post discussing P&G’s Swiffer(R) product line. P&G’s patenting strategy so successfully protected the value provide to customers that P&G has effectively “owned” the market for more than 15 years. In other words, P&G’s patents were “market making” for the company.

This is where the “easy” formula ends, however, and the real work begins. Such “market making” patent portfolios are not only expensive to procure, they can be difficult to obtain, if only because many patent attorneys are not skilled in developing patents of this type. In short, patent attorneys are trained to obtain the details of what an invention is and how it works, which means their primary point of contact in drafting patent protection is the company’s technical staff.  In contrast, the type of patents that I am talking about here require customer-level details that are usually out of reach of the folks who are tasked with obtaining patents at the company. This means that in order to execute on the “easy” patent value formula, business leaders must be prepared to reformulate roles and responsibilities within their organizations as related to patenting decisions.

Of course, in many organizations, changing reporting structures as required here nowhere near “easy” which means that creating real patent value may not be possible without support from the highest levels of the organization. For smaller or more nimble organizations, creating real patent value, while still not “easy,” can be a more attainable solution in the short-term.

I will be writing more posts in the coming months on reducing business risk through implementation of robust IP and patent strategies using strategies and concepts that are easy for business leaders to apply. In the meantime, please feel free to reach out to me directly if you have any questions or comments.

 

 

Companies Create Risk by Leaving IP Strategy Out of Innovation

missing personI recently had to give bad news to a new client, the CEO of a successful global electronic hardware company. This CEO hired me earlier this year to help ensure that his company’s upcoming innovations, which were the product of a several year turnaround program, were protected from competitive knock-offs. I have completed a couple of projects for the company to date, and he now wanted to discuss IP protection for a new product for the European market that would serve as a platform for later product spin-offs both there and in the US. This new product incorporated a number of highly innovative features and almost certainly could generate broad patent protection. Unfortunately, however, I had to inform my client that his company’s important innovation could not be patented in Europe because the product launch date occurred several months ago.

While many reading this will immediately know that there is no “grace period” for filing for patent protection in Europe, no one on the CEO’s innovation or R&D team knew of this hard and fast rule. Moreover, the company’s relationship with their outside patent counsel was one where the lawyer only interacted with his client when someone at the company thought to call him. Of course,if someone had thought to call him, the first or second question the outside counsel would likely ask when called is “when are you putting a product on sale?,” but there was no possibility of that occurring with the counsel’s “hands-off” relationship. The absence of expertise and accountability for IP inside or outside of the company meant that IP issues were destined to be given short shrift, with the inevitable result that a major mistake would be made one day. And, this was the time for the mistake to happen.

The fact that is, like many companies, his team had always viewed IP protection as an event, as opposed to being part of the innovation process itself. While the company has obtained several patents over the years, IP protection had been addressed, if at all, only as an output of the product development processes. Certainly, merely being reactive to IP issues did not cause problems when the company was not bringing any real innovations to market because its competitors had little motivation to knock them off when customers were not really wowed by their product offerings. However, with the company’s new focus on innovation, competitors now possess increased incentive to copy those features of my client’s products that drive customer demand. These innovations were intended to generate premium profits for the company, and the increased revenues expected were part of the cash flow projections the CEO presented to his investors. However, since my client is now precluded from obtaining IP protection for these innovative product features in its major market of Europe, competitors can freely copy my client’s products.

Many leaders might look to ascribing blame for this error, but my CEO client took a different tack. Since other innovation leaders might benefit from his approach, he gave me permission to relate this story here, albeit anonymously.

First, without missing a beat, he let me know that he would now reassess the risk profile of future revenue and cash flow predictions recently made to investors for this new product innovation. That is, my client immediately recognized that missing the opportunity to patent an important new product for the European market elevated his investors’ risk, and it was his obligation as CEO to inform them of this fact.  Second, he knew that the company must prevent this situation from occurring in the future, especially given that the company had several more product innovations in the pipeline. He asked me to provide him with an action plan regarding his company’s IP strategy.

I let my client know that the only viable option to prevent this error from happening again required that IP strategy be integrated existing innovation processes. Such a proactive stance would enable decisions about IP protection to be addressed as part of the company’s innovation management processes, instead of being merely a box to be checked at the end of the product development process, as had been done in the past.

A solution that many companies select when seeking to be more proactive is to put someone in the company in charge of IP protection. For large companies or those where patents form a large part of overall company value, it often makes sense to hire business-focused IP counsel. This inside resource will have visibility to the company’s ongoing innovation activities and will be accountable for generating strong IP protection. However, this is not a viable option here for both budget and work load reasons. Another potential in-house alternative for my client is for one of the company’s managers to receive training in IP and to make that person accountable for generating IP protection aligned with innovation strategy and revenue goals. This is certainly a viable plan over the long term, but my client’s need for IP strategy is immediate given the innovative new products now making their way down the company’s pipeline.

Of course, some of my outside IP counsel friends–in “fox guarding the hen house fashion”–will suggest that they be given the role of meeting with company management on a regular basis to do “invention mining” so that they can develop patent applications on a more regular basis. This is not the answer, however: periodic meetings to discuss what the company has already done will do nothing more than create more opportunities to be reactive, with the primary benefit likely be more business development for the attorney. In short, more meetings to discuss IP does not an IP strategy make.

The only real solution for a company with the characteristics of my client is to incorporate an IP Strategist like myself as a bona-fide member of the innovation team on a part-time basis. While the uninitiated may find it difficult to visualize how this would be done, in practice, this is a fairly straightforward endeavor to execute. As a first step, I will be given access to the company’s innovation roadmap and related product development information. This advance visibility to products in the pipeline is an obvious, but often overlooked, aspect of a company’s creation of an IP strategy plan. A second step is to include me in the company’s regular innovation team management updates and, in no case, should more than a quarter be allowed to pass without a substantive team meeting where IP issues are discussed.

Lack of Focus on IP Strategy Destroys $100 Millions in Value

invalid patentAs an IP Strategist, I am fascinated by stories from which declining business fortunes can be traced directly to failed patent strategies. Often, the failures can be traced to patent attorney errors that limit the effectiveness of a company’s patent to prevent competitive knock-offs, but, often, the problems can be traced to the lack of accountability for IP strategy within an organization. For those companies where IP is a primary driver of competitive advantage, the absence of someone who “owns” the job of making sure IP is properly captured and protected can result in unrecoverable errors that opens the innovator to unwelcome competition. In this regard, the recent loss of patent protection to a popular drug product should serve as a useful case study on why the C-suites of innovative companies should consider strategic in-house IP counseling to be a mandatory aspect of their business strategy.

In July 2015, the Federal Circuit effectively eviscerated the revenue prospects for a successful pharmaceutical company when the court found the two patents covering the popular blood clotting treatment Angiomax(R) invalid.Angiomax, which had U.S. sales of $599.5 million for The Medicines Company in 2014, is the brand name of a drug called “bivalirudin” that is used to treat blood clots in people with severe chest pain or who are undergoing angioplasty to open blocked arteries. While the company has other drugs in the market, Angiomax is the lead product for the company, accounting for 80% of the company’s sales in 2013. Angiomax has been a blockbuster drug for the company and, prior to this month’s court decision, the company was expected to hold patent exclusivity for several more years. The Federal Circuit decision opened the way for generic equivalents to enter the market almost immediately after the decision, and it can be expected that The Medicines Company’s revenues from Angiomax will decline precipitously in the near future.

Those reviewing the court’s decision will likely be quickly lost in the weeds as to why the Angiomax patents were found invalid. Briefly, the issue addressed by the court was whether the facts showed that the methods and compositions claimed in the patents were “on sale” more than one year prior to the November 2008 filing date. The issue arose because The Medicines Company paid a contract manufacturer to prepare several batches of product as early as October 2006. Notably, the batches prepared by the contract manufacturer included a newly identified efficient mixing procedure that not only provided an improved manufacturing process, but which also generated a new composition. Both this method and the composition obtained from the method–a more pure form of the active ingredient of Angiomax–became the subject of the November 2008 patent applications. While the first patents for Angiomax were set to expire in June 2015, the later-filed patents covering the improvements to the method of making and the more pure product would extend patent exclusivity to The Medicines Company for several more years. However, in reviewing the circumstances of The Medicine Company’s commercial interplay with its contract manufacturer, the Federal Circuit found that the method and compounds claimed in the two patents had, indeed, been on sale prior to the “critical date.”

The Angiomax case gives rise to facts that patent lawyers find fascinating to relate to clients: there will no doubt be many “Urgent Practice Updates” from outside counsel cautioning their clients about the potential perils of dealing with contract manufacturers when patent filing is a possibility. However, this inevitable focus on legal issues misses the crux of the business issues that gave rise to the invalidity decision in the first place. Indeed, if a client and her outside counsel are parsing the details of whether she can file a patent by evaluating the activities conducted on more than one year prior to the patent application filing date, a mistake was already made because the patent filing issues were not kept visible while business was being conducted at the company. We can see this by further examining the facts of the Angiomax case.

In reviewing the trial court decision and various pleadings in addition to the Federal Circuit decision, it appears that The Medicines Company’s patent woes can be traced directly to the fact that it appears that no one in the company held responsibility for ensuring that IP protection followed along with other activities. Namely, when the manufacturing team needed to find out the reasons for batch failures in 2006, which were solved by bringing in a consultant, no mechanism existed for bringing the discovery of the improved process and composition to the attention of IP counsel who could then evaluate whether patent applications should be filed to protect these improvement. It was not until two or so years after this discovery did anyone at the company appear to realize the significance of the process improvement efforts to potentially extending the patent exclusivity for Angiomax. In short, it appears that everyone was focused on doing their respective jobs of getting salable product out the door in the face of critical manufacturing problems, but it was nobody’s job to review whether these efforts should be patented to enhance The Medicines Company’s patent exclusivity for its blockbuster product.

Notably, it likely would not have been enough for outside counsel to sit down with management on a regular basis to say something along the lines of “have you invented anything new?” because, at the time of the manufacturing process improvements, the focus was on meeting the supply demands for Angiomax.  In short, because no one “owned” the role of IP strategy within the company, it was the epitome of “out of sight, out of mind.” While I am, of course, speculating on what happened, I have seen this situation enough times to expect that only when The Medicines Company’s management realized that the 2006 improvement efforts could extend its patent exclusivity for Angiomax did they seek to obtain a patent as a reaction to a shortening patent term. And, as the Federal Circuit ruled, they waited too long to do so. If the team had included someone whose job it was to proactively address IP strategy on an ongoing basis, I contend that person would have either held the legal knowledge to recognize that patent protection was available or it would have been incumbent on her to raise the issue with outside counsel. In either circumstance, it is more probable that The Medicines Company would have filed for patent protection in a timely manner and the Angiomax patents would remain valid today.

It should be noted that this does not appear to be a situation where outside counsel failed to obtain adequate patent protection. To the contrary, once The Medicines Company decided to file for patent protection in late 2008, “the damage done been did,” and all outside counsel could do was “damage control” to try to convince the courts that its client was entitled to an “exception” to the rule that one has to file for patent protection within one year of the claimed invention being “on sale.” The Medicines Company hired excellent (and expensive) outside counsel to save it from its bad decisions, to no avail. (As an aside, the trial record indicates that The Medicines Company’s patent counsel did not disclose the sale activity to the Patent Office during prosecution of the Angiomax patents. Thus, I would expect that the company’s outside counsel did not know about the invalidating activity until litigation ensued.”) Even if the Angiomax patents had been upheld, at a minimum, it can be said that the vast expense and business uncertainty resulting from several years of patent litigation could have been avoided if The Medicines Company had prioritized IP strategy within the organization in 2006.

Again, while I am speculating, I expect that management of The Medicines Company did not think that the size of its patent portfolio justified hiring of a full-time in-house patent counsel, and they were probably correct.  However, the fact that the primary source of the company’s revenue could be directly attributed to that patent portfolio, mandated that an in-house resource be assigned to manage and be accountable for IP strategy, at least on a part-time basis.

Fortunately for small- and mid-sized companies, there are now innovative practice models where experienced in-house counsel can provide business-focused IP counsel on an as-needed basis. I represent several innovative companies that require strategic IP advice on an ongoing basis. Patent GC is another of these practice models. While this is certainly “the fox guarding the hen house” advice, I strongly recommend that management of companies where revenue is directly attributable to obtaining adequate patent protection investigate engagement of strategic in-house counsel advice like us to better ensure that their IP strategies are sufficient to create durable competitive advantage for their businesses. At a minimum, C-suite executives at small to mid-sized companies should look to the declining fortunes of The Medicines Company to develop actionable approaches to elevating the importance of IP strategy within their businesses.

(Note: This case is not the only problem that The Medicines Company has faced with Angiomax’s patent protection. While management now seeks to blame its previous counsel for its patent woes, certainly the lack of in-house IP strategy influenced these other situations, also.)