Taking a Disciplined Approach to Protecting Innovation Investment Allows You to Reduce Legal Spends While Still Obtaining Necessary Patent Rights

Protection of innovation need not be expensive
Protection of innovation need not be expensive

This week, I am intrigued by what appears to be a recent convergence of reporting and blogging about the state of innovation in the US. There is an obvious concern by those who keep track of such matters that, in the current economic climate, government and business will “take a hatchet” to R & D and innovation budgets in an attempt to reduce overall costs. Such cutting is, of course, a rational short term solution to address today’s problems. Government and corporate leaders taking the long view will nonetheless understand that, when it comes to R & D and innovation spending, it is much better to apply the proverbial “scapel” to one’s budget.

Moreover, as discussed by Tom Donahue (President and Chairman of the US Chamber of Commerce) recently on The Huffington Post (h/t Front End of Innovation), intellectual property protection is a critical component of successful innovation efforts. No organization wants to give its competitors, whether another company or country, free R & D–but, that is exactly what happens when an innovative organization fails to include patent protection a critical component in its innovation strategy. It is therefore mandatory that an organization that chooses to “bite the bullet” and invest in innovation during today’s challenging business conditions also develop a strategy to obtain intellectual property protection for those innovations.Fortunately, protection of innovations does not necessarily mean that an organization must increase patent legal spends. An organization can actually reduce the amount spent on patent protection by adopting a disciplined and strategic approach. When operating in this way, all decisions regarding patent protection are made only when the legal spend supports the recognized objective served by the associated innovation investment.

Successful implementation of such a plan necessarily requires that business issues drive the go/no go decisions regarding patent protection. Decision rights for patent procurement must therefore become either singly or jointly the responsibility of those corporate managers who are responsible for selecting and supporting the organization’s innovation investment.

Business managers who obtain responsibility for ensuring return on innovation investment can act to reduce patent spends by adopting a disciplined approach to patent protection. Each organization will view this disciplined approach in relation to its unique characteristics. However, the common thread to this approach is that the successful organization will adopt a concrete and reproducible framework for decision-making regarding patent protection, and will hold participants accountable for following the process.

As one example of this disciplined process, the organization can decide that patents will not be obtained unless the NPV of an innovation opportunity meets a pre-determined threshold level. Why spend $30 K to obtain a patent for an innovation that has a useful life of only a few years and a total NPV of $3 MM? The patent might not even issue before the innovation runs its course in the market and, as such, the patent protection would be fairly meaningless anyway. This disciplined approach to patenting would dictate that, regardless of how “cool” the innovation is, the organization will obtain a patent only when the cost of patent protection does not reach a pre-determined threshold of NPV for that product or technology.

A further example of this disciplined approach is for the organization to decide that patent protection need not be ideal in order to adequately protect the business. All too often, organizations invest heavily in patent protection in an attempt to fully protect the upside opportunity of a new product or technology. When the project fails, the organization is left with “gold plated” patent protection for a worthless product or technology. The disciplined approach to patenting can mandate that the organization obtains patent rights that are adequate, but are not so broad as to fully protect the upside opportunity associated with the innovation. The risk to such an approach is that if the innovation is a runaway success, the patent rights may not be broad enough to fully exclude competition. Few product or technology innovations are truly runaway hits, however, so the organization that decided that not all patents must be gold-plated would probably come out significantly ahead in patent legal spends.

These examples are just two of many other ways that exist to permit innovative companies to obtain effective patent protection while at the same time reducing patent legal spends. The key to effectively doing so is to let the business process drive the strategic decision to obtain patent protection. This is undoubtedly a new role for many business leaders, but a critical one in today’s economic climate.