How Patents Can Defend Your Company Against Lawsuits

Many high tech business executives have told me over the years that they don’t obtain patents and don’t think patents have value for their company because they don’t ever plan to sue anyone for patent infringement. This common but flawed logic can have devastating consequences for companies that follow it.

What I explain to these executives is that patents can be extremely valuable to your company, and can save your company from a crisis, even if you never sue anyone for infringing your company’s patents. Today I will focus on just one way in which patents can be valuable for defensive purposes, namely to defend your company against a patent infringement lawsuit brought against your company by a competitor.

The vast majority of my clients never sue anyone for patent infringement and don’t plan to do so, yet many of my clients have experienced the benefits of having a strong and extensive patent portfolio both to defend themselves against lawsuits and to deter competitors from bringing such lawsuits in the first place.

Do you have a competitor who is much larger than you and who keeps you up at night worrying about how they might put you out of business? Maybe you have several such competitors and if any of those competitors has a patent portfolio and is aggressive about asserting that portfolio to take down smaller companies like yours then you need to hear what I’m about to say.

Recently, I had a client who was in exactly this situation. They are in an industry with a much larger competitor who owns a massive patent portfolio. This competitor is well known for using its portfolio to sue smaller companies for patent infringement in order to drain them of resources and either put them out of business or acquire them at a bargain basement price.

Fortunately I’ve worked closely with this client for many years to build an extensive defensive patent portfolio with their large competitor in mind. We have long planned to be prepared to be sued for patent infringement by the large competitor. This included obtaining patents that would be broad enough to cover the competitor’s products and services. Of course we did not do this with the intent of proactively suing the competitor for patent infringement. That would be suicide. Also, we knew we couldn’t compete or go head to head against the competitor on sheer volume of patents because they have thousands of patents in their portfolio. Instead, we focused strategically on creating a highly targeted patent portfolio that would cover both my client’s products and services and their competitor’s most valuable technology.

Although I can’t prove that this deterred the competitor for suing my client, I do know that this competitor sued and acquired many smaller companies in the industry for years without suing my client. So it is a safe bet that our patent portfolio at least played some role in keeping this competitor at bay for a very long time.

Then finally, the inevitable happened. My client’s competitor sued them for infringement multiple patents. If we had not built up a strong defensive patent portfolio over the course of many years in anticipation of this event, my client likely would have had no option but to settle the lawsuit quickly in a way that would be very unfavorable to them. Fortunately, however, we carefully reviewed our defensive patent portfolio and easily found several patents that we were confident were being infringed by the competitor that had sued my client. As a result, we launched a counter suit for patent infringement against the competitor. Although the litigation is still ongoing, I can say so far that all of the extensive foundation that we have laid over the years has at least given my client ammunition that they can use to fight back against their competitor whereas they would have had none if they had no patent portfolio. If my client’s management had fallen prey to the myth that small companies don’t need patents because they don’t plan to sue competitors for infringement, they would have found themselves lacking a significant tool to use in their defense.

As you can see, developing a strong, defensive patent portfolio that is designed strategically to cover your most powerful competitors technology can be a life saver for your business. If one of your powerful competitors ever sues you for patent infringement, this is reason alone to place a high priority on patents for your company even if you don’t even plan to suit anyone for infringement.

In future instalments, I will cover many more reasons for small to medium sized companies to create strong, broad, defensible, and strategically designed patent portfolios.

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