Patent Sharks and a Euro Perspective on Circumnavigating Them.

The June issue of Harvard Business Review published the opinion and suggestions of Prof. Henkel of Munich Univ. of Tech., and Asst. Prof. Reitzig of the London Business School, about the pursuits of “patent sharks” in the U.S.  While no mentions of the CAFC, or of any past or proposed patent reforms, was refreshing, the Professors’ assessment and suggestions offer an unlikely way forward.

One repeated premise is the problem of “hidden” patents, and companies’ lack of awareness until being sued for infringement. Drawing upon the lurking “shark” metaphor, the article highlights the “kind of patent [that] remains hidden” and the problems “When patents are hidden.” How are patents, hidden? It notes that “Had Boston Scientific known of [Dr.] Saffran’s patent while” it was developing its stent, then “it most likely would have invented around his [Saffran’s’] technology.” My reaction, knowing little about that infringement case, was why would a company proceed to market in a crowded field of art like stents without going to school on all the prior art? To launch a $1B product, without having “known” what was in published, issued patents, and not having “known” in 2003 of an ‘invent-around’ option for a patent issued in 1997, seems like taking on avoidable, forseeable risks.

Another premise is that only “sharks” can obtain never-commercialized patents at, for example, a bankruptcy sale. What keeps tech companies from buying at fire sales, when the bankrupt was known to be doing development in their tech space? Again, these sales are on public notice, and open to the public – not hidden. If some start-up tanks, and it has the earliest-filed patent application in your company’s field of art, then get someone over to the auction to bid.

The Professors set out five suggestions. Numbers 1 and 5 urge fewer patents. #1 says to “move away from building huge patent portfolios” because that IP cannot be cross-licensed to a patent shark to end litigation. #5 says companies “must stop flooding patent offices with insignificant inventions.” Both of these may be wise, but neither offer any certain means to avoid or negate infringement suits. Suggestion #2 regards standards-setting, and avoiding development where the core technololgy may end up patented by one company, i.e., the Rambus cases. My perception is that Rambus doesn’t fit the profile of a patent “shark,” but that their transgressions are more remediable. The suggestion #3 to work with “competitors early in the R&D” stage is consonant with new business models, but again, it offers little direct insurance against being sued by some non-operating, patent holding company. The suggestion #4 to get the patent lawyers involved earlier in the project is the proposal closest to providing meaningful defenses to newly-developed technology being accused of infringing obscure, but findable, patents.

The article is just one more voice on the topic, and a non-legal perspective on remedying the problem with offered solutions. By never mentioning the ‘iceberg’ or the ‘fog’ out there, from the jurisprudential, uncertainties over the meaning of patents and their scope, the article is a bit adrift and looking out only for sharks.