Last summer, I was working on IP due diligence for a private equity group making a $50 million bid for an innovative and established company (whose product I actually saw recently on “This Old House”). The target company had spent hundreds of thousands of dollars over the past decade building a robust and broad patent portfolio.
Despite all that effort to protect their own products, we discovered a competitor’s patent that appeared to pose a risk to the target’s most lucrative product. What’s more, the competitor not only had really broad protection, but was a major player in the industry with deep pockets.
What was really saddening was that the target company’s CEO had long known about the risky patent. Despite having spent loads of money to protect his own products, he had decided, without input from his attorney, that this existing patent did not pose a threat. And because of this, he didn’t even disclose it during the due diligence.
When we discovered the patent on our own and came to a different conclusion regarding the risks than the CEO had, it largely sunk the deal.
It is a scenario that is fairly common in the intellectual property world: You have developed a new product or process and are prepared to seek a patent. There is just one problem — there’s a similar product or process already in the marketplace.
What now? Find a design around. This approach means that being second to market doesn’t have to mean scrapping your product.
What Is a Design Around?
A design around means developing your product with existing patents in mind and adding consumer value with new innovation.
The starting point for this process is a patent search. Although our clients are often experts in their industries, they may not have sufficient insight into the patent landscape of that industry. Many patents do not relate to a product that made it to market, but still may be held by a competitor. Some basic patent searching will begin to shed light on a design-around path.
It’s a task that your designers, developers, or product managers can undertake without formal training in patent search. Google has a very strong natural language searching interface and algorithms. I advise all clients to work this searching into their product development timeline.
The Danger of Skipping a Design Around Analysis
One of the most common things we see is a company choosing to proceed to market without doing their due diligence. It happens all the time.
In a lot of cases, it stems from the false assumption that no one else is pursuing the same innovations, but they often end up walking into a minefield because patents often protect ideas that have not been transformed into real products. So, doing internal patent searching or asking patent counsel to do some brief searching needs to be a part of your product development timeline.
And while internal searching is very helpful, that may not be enough for the most important products in your lineup. Patent counsel should always be looped into the effort.
I often find existing patents in a matter of minutes that clients weren’t able to find during hours of searching. Or, the client sees little risk in the claims of a patent that they find, but the legal analysis shows far more risk. In other cases, the client shies away from a product that could have been pursued with a stronger design around analysis from counsel.
Cost Analysis: Pay Now or Pay (Much More) Later
The cost of performing a more formal search and brainstorming design arounds with counsel is certainly a lot of money for any company that’s trying to bootstrap.
But, if you forego this and grow rapidly in your industry, there’s a good chance that you’ll run afoul of someone’s patent. There are just too many companies out there, too many people coming up with new ideas, to imagine that your innovation doesn’t have some similarities to an existing patent.
Don’t Be an Armchair Patent Attorney
I like to compare the armchair patent attorney to the DIY work I have done around my house.
I’ve done a lot of electrical and a little bit of plumbing. I learned how to do most of it by watching YouTube videos. What you find after you do enough work on your own home is that you can do those tasks when everything lines up with the way that YouTube portrayed the challenges.
But when you run into one of those situations where something comes up that didn’t match what you saw on YouTube, you’re clueless. And that’s when you burn down your house.
Similarly, in patent law, people reading things on the internet can get maybe 40% of the way to the finish line on their own. Most of the time, though, things come up that those resources do not prepare you to handle.
I’ve worked in this field for 10 years and I know all of the strategies to avoid making those mistakes. No one reading Wikipedia is going to be prepared for the unknown. More likely than not, they’re going to make mistakes and it is going to tank their patent and their company.
Questions about protecting your intellectual property? Schedule a consult.