India: Defensive Patents… Bombs For Future Business Battle!!!

Patents are granted to encourage innovations and to promote Research & Development. The primary motive of filing application for the grant of patent is to seek legal protection for an innovation so that it can be commercially exploited without any risk of its infringement. Defensive Patenting is an upcoming strategy with secondary motive, the motive of keeping the technological advancements out of competitors' hands i.e., a patent protection is sought for an invention that a company does not plan to exploit itself, but seeks protection just to prevent other companies from commercially exploiting it. The motivation, under such circumstances, is a negative one as it tends to restrict a competitor's freedom of operation.

The rationale behind defensive patenting is to build a penumbra of patent protection around the main patent thus reserving the field of technology and eliminating the potential competitors. However, some companies obtain patents for similar products or processes not only for defensive reasons but also for ensuring freedom of operation.

This strategy of Defensive Patenting is mainly practiced by those companies that have a strong presence in manufacturing a particular type of product. Those companies not only obtain patents similar to the main patent but also acquire patents that are somewhat closely related to the main patent. This ensures that the competitors' have a difficult time in making similar product without infringing the innovator's product. This also ensures their delayed entry into the market. Defensive patents can protect their holder in following ways:

  • the gamut of patents can be used as a defensive weapon against counterclaim;
  • a firm's negotiating position with respect to the competitors' can be strengthen, for example, as in cross-licensing;
  • used for defensive purposes when the competitor threatens the patentee in a related technological domain;
  • to restrict the entry of potential applicants in the technological domain;
  • to provide freedom of operation; or
  • to obstruct market access of competing products.

From a business outlook there are three reasons to seek patents:

Offensive Reasons: Patents are sought to strategically shield one's technology or markets. Patents are used offensively to build a portfolio that is directed towards all aspects of one's product. These patents are usually those that cover something that the inventor company plans to practice or is practicing. The patentee can use such patent to offensively sue for infringement or seek a cross-license.

Defensive Reasons: Here, Patents are registered purely for defensive purposes. They are the ones that cover something that a competitor may possibly practice or is already practicing. That is, such patents safeguard the business by providing protection from litigation.

Market Reasons: Finally, there are various commercial reasons due to which an innovator files an application for or maintains a patent. As a consequence of marketing strategy, stating that a product is patented might add to the perception of customer that the product involves a cutting edge technology.

Strategies

Based on the company's perspective, different companies adopt different strategic use of patents.

Offensive Strategy

In an 'offensive patent strategy,' the company obtains patents for each and every innovation similar to its product, thereby protecting others from practicing the actual invention of a company or an invention which the company is aiming to practice. For example, if an inventor develops a better water purification system, the inventor may want to prevent others from making or selling the same system.

These patents serve as a barrier for the potential competitors and are intended to make a competitor go a long way to design around a product. A wise Offensive Patent Strategy, thus, safe guards the growth of an emerging company and also maintains its strong position in the market. Holding a patent and maintaining it for offensive purpose is only effective when it prevents a competitor, having different but equally effective product, from targeting the same market segment.

Defensive Strategy

This strategy aims at building a Patent Portfolio that fends off threats of infringement suits. The inventor company seeks for patent protection with respect to inventions that may compete with its inventions. The protection sought may be for inventions that are similar or different from the invention which the company is actually practicing or intends to practice. This strategy confers a competitive edge in the market and enhances the company's bargaining power in cross-licensing negotiations.

The major driving factor for obtaining patents for defensive purpose is to preclude others from suing the inventor company for their own products, thus, preventing potential litigation. For example, the patent owner of a better water purification system may invent another system that works as effectively or even better but for reasons such as production costs, etc., the patent owner prefers to stay with the original patented product. However, the inventor does not want anyone else to practice the second purification system; therefore, he obtains a patent on the second system also to prevent anyone else from practicing the second invention.

Even though the company intends to never use the invention, but still obtains the patent for that invention with an anticipation of using it in future or selling it to a competitor. However, this strategy is not suitable for emerging companies as it would be very expensive for them to file huge number of patent applications. Alternatively, such organizations may defend their invention by simply disclosing them through publication thereby destroying the novelty of the invention and making it a part of prior art. This strategy is often known as Defensive Publication.

Another approach, known as defensive patent aggregation, involves purchasing of patents to keep such innovations away from the hands of those companies that might use them against the originator company.

When the companies hold patents only for defensive reasons and not for safeguarding a practical commercial development, then this practice is not in tune with the fundamental objectives of the patent system and consequently it becomes anti-competitive. The scientists and researchers will innovate with sheer purpose of profiting from the patents rather than contributing to the greater public good. Consequently, the concept of Defensive Patenting can give rise to an imbalance between commercial imperatives and the public interest.

Conclusion

An essential part of inventing a product and selling it is to protect it through patent, and in ability to do that might lead to far more dominant competitors'. Consequently, a company should develop an appropriate strategic use of patents which makes its innovative product more desirable than a competing product. Offensive strategy prevents others from practicing the actual invention of the company. It entails patenting the inventions which the innovator company intends to practice. While in defensive strategy a company obtains the patent for those innovations which the competitor is practicing or intends to practice.

That is to say, the defensive strategy establishes the non-infringement of patent of interest, whereas, the offensive strategy renders the accused patent invalid or unenforceable. Adopting such strategies to create a patent fence around the patent in question also shields the innovator company's market segment.

A strategically created patent portfolio can protect the core technological concept of an organization. However, an ambiguity, that a patent is obtained with defensive or offensive intent, still exists. In practice, it is very difficult to detect the intent with which a company acquires a patent. It usually depends upon the timing and the situation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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