Winning the IP game: Embracing Offensive IP Strategy

The ever-growing importance of innovations has changed the way corporate boards overlook their intellectual property assets, thus focusing more on developing and managing their IP strategy. In today’s knowledge-driven economy, innovation has become the critical factor for determining competitive advantage and sustainable development. Give the intense competition; there is immense focus on IP protection and attain an innovative position vis-à-vis competitors.  Majority of the companies have realized the importance of IP as a strategic tool and its impact on company’s competitive advantage and performance.

Patents are no longer seen as merely a means of protecting innovation but also considered as an important part of company’s assets that can be licensed or sold through strategic decision making to attack or defend the competitors. The importance of IP in company’s future strategy has led to rise of new distinctive companies that specialize in buying, selling, licensing of patents, thus act as patent aggregators. The primarily aim of these companies is to extract value from their IP assets through licensing or enforcing litigation.  It can be defined as patent owner or conglomerate that neither conducts any research and development nor manufacture products or services. Instead, it seeks value from claiming royalties from licensing revenue streams. These companies evaluate the patent portfolio to assess the quality for licensing and identifying the companies in the marketplace for the purpose of infringement.

Through these activities, these Non Practicing Entities or NPE(s) are able to negotiate license agreements with infringers. NPEs need to understand the global patent research, screening, negotiation and litigation tactics.

Managing company’s comprehensive intellectual property (IP) portfolio is a key to create long term revenues streams and improve market position. Innovations are a part of the company’s success and have to be protected for all businesses across industries. The strategic use of intellectual property is to prevent imitation of products or services and isolate potential competitors. Protection of IP assets is more intense when innovation strategies are in line with the product innovation.  It is imperative for companies to design and implement an effective strategy for patent management. Many companies try to minimize cost by protecting their innovations in a limited number of geographical areas. However, they can reduce cost by selectively prosecuting patent applications by defining broad claims and strategically licensing technologies. An effective IP portfolio management requires a holistic understanding of the business strategies and identifying opportunities and threats in the market. This results in gaining competitive advantage and helps to drive profits. A patentee has exclusive rights to make, sell, license products or services. Patents covering essential features of the original technology help the companies to gain market share and earn profits.

A company’s primary motive of embracing IP strategy is to protect one’s own proprietary technology through patent filings.  A company seeks to create a patent portfolio that emulates planned/product development plans in order to gain competitive advantage and support long term goals. To build an offensive IP strategy, companies must evaluate the competitor’s space and enable attacking the competitor. The company has to map out essential features of its own products or services and of its competitors which includes mapping improvements within the industry, thus identifying potential targets for infringement and licensing.  An offensive IP strategy helps the company to evaluate its patent portfolio and attract billions of dollars through licensing opportunities. The IP offensive strategy is mostly used by Non-practicing entities (NPEs), which don’t develop or make any product, but license their patent portfolios to other practicing entities. The NPEs acquire patents across industries in order to earn revenue by licensing technologies to other operating companies.  The strategy is useful to the company to take any action against infringers and focuses on acquiring an entire gamut of patents to advantage of the competition. An offensive strategy can be adopted by a company due to following reasons:

1. In order to battle it out in the fiercely competitive market, companies need adopts offensive IP strategy and obtain patents on every conceivable improvement around the core technology and can utilize the same for the purpose of licensing as the competitor cannot use the invention without obtaining a license from the company.
2. A company can also avoid infringement cases by obtaining patents for the efforts to design around company’s own patents.

• Gather information about the competitor’s portfolio and understanding industry landscape can help the company to focus their R&D efforts and obtain patents with broad claims which can be improvised at a later stage.

1. Acquire patents with current or future areas of interest.
2. Identify potential infringers in the marketplace and suing them for using the patented technology and in return earning royalties through licensing revenue streams.

The rationale behind offensive strategy is to protect and obtain patent for company’s technology or similar products in order to exclude other to make or sell the same invention. This enables the company to safeguard and strengthen its position in the market. The offensive strategy involves understanding the competitive landscape and making informed decisions in relation to competitor’s patent portfolio.  The company needs to create and develop intellectual property to gain an edge over the competition. An offensive strategy is also embraced to fill a gap in the competitor’s portfolio and license it product to the competitor’s.  In order to pursue effective offensive strategy, the company needs to conduct proper diligence and gather information about competitor’s patent portfolio.  A comprehensive offensive strategy is the best way to protect the invention as well as managing risks in the competitive marketplace. A company should employ an offensive IP strategy in order to protect its own inventions and increasing it revenues by forcing competitors to take licensing to use the particular technology. To sum up, an offensive strategy is needed to develop an IP portfolio that inhibits competition and create competitive advantage that is in tandem with company’s business goals. An effective IP strategy not only constitutes speed-to-market but also preventing competitors in imitating the product over a long period of time.

Amit Aggarwal is a Co-founder of Effectual Knowledge Services.

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