News, views and contacts from the global Semiconductor industry

Patent Power


1 February 2007


Careful patenting of intellectual property is essential if your company is to protect its global interests. Peter Mikhail, Peter Gallagher and James Hsue ask "Are you IP aware?"


The world of electronics and semiconductors truly has no borders. In today's fully networked world, product design, manufacturing and sales take place around the globe. Your operations may be scattered all over the world, with your headquarters on one continent, product designers on another and manufacturing on yet another, and it is likely to be the same with many of your customers and suppliers. Your product will undoubtedly incorporate components from around the world.

Unfortunately, although the marketplace has no borders, intellectual property safeguards are truly territorial. The world is a patchwork of different protection levels and enforcement mechanisms. Paradoxically, a country that may be the most appealing from a business standpoint may, at the same time, be the least appealing in terms of IP protection.

It may be many years before it is truly in the best interests of many primarily manufacturing-based countries in Asia to have an IP system with real teeth. Until then, while it is wise to hedge by investing in IP in the nascent stages of these systems, strategies for protecting intellectual property are still largely based on the systems of developed nations, particularly the US.

NO DEFAULT PROTECTION

Your business is based on information that you may consider proprietary, but it is not, by default, protected from unencumbered use by others. Protecting the business endeavours and technical expertise of your company depends on availing yourself of the full scope of currently available trade-secret and patent protection.

Both trade-secret and patent laws play an important role in protecting your business, and each should be addressed with well-thought-out strategies with customers, suppliers and employees.

Perhaps in tacit recognition of the problems with intellectual property enforcement on a global level, the US courts have recently started to afford extra-territorial reach to US patent laws regarding infringement of US patents.

"US courts have recently started to afford extra-territorial reach to US patent laws regarding infringement of US patents."

A well-drafted US patent can now be infringed by actions on the other side of the globe. This is a very interesting development for any company – your patents should be drafted to take advantage of this new-found reach, and you should be aware of the potential new reach of patents that may be asserted against you, your suppliers and your customers.

AGGRESSIVE ENFORCEMENT

The cliché that the best defence is a good offence applies to the business of IP protection. The team with the best offence will follow their own game plan, without being overly worried about an attack, and it will be well prepared for doing business in the modern realm of aggressive IP licensing and enforcement.

In addition to allowing offensive assertions, a strong portfolio will make a company a less attractive target for others seeking to enforce their own IP. Strategic patent protection calls for a deep and diversified portfolio. This means that your products should be patented not only at various levels, from system down to component, but also in the most important countries where sales, design and manufacturing take place.

Whether your company manufactures its own products, outsources manufacturing or relies on a technology licensing model, a strong and diverse portfolio is valuable, if not essential. Many well-known companies generate a large portion of their revenue from licensing royalties, including those with and without tangible products in the marketplace. Valuation of a company, whether private or public, is often highly influenced by its IP position.

THE POWER OF THE PATENT

A patent allows you to stop someone from making, using and selling a product or process. It follows that patent protection should focus on a group of countries where such activities may take place. In addition to Europe and the US, patents are often filed and enforced in Japan, Korea, Taiwan and, increasingly, China. While many nuances exist between the various national patent systems, with skilled patent advice, a patent drafted for one system can generally be obtained and then subsequently enforced in other nations.

"The cliché that the best defence is a good offence applies to the business of IP protection."

Some judicial precedence should be taken into account to maximise the licensing and enforcement potential of your future patents. The difference in potential damages between a narrowly described or hastily drafted patent and a well-thought-out and broadly described patent can be substantial.

The market value rule recognises that the economic value of a patent may be greater than the value of the sales of the patented part alone. Under this rule, courts have allowed the recovery of lost profits or a reasonable royalty based not only on the profit from the patented part, but also on non-patented parts.

Under this rule, damages can include lost profits for both sales of non-patented machines and nonpatented spare parts for those machines.

In today's aggressive landscape, it is essential to develop a comprehensive IP policy that protects your confidential information from the initial stages of product development through to manufacturing and sales. Safeguarding your trade secrets and creating a strong international patent portfolio will serve you well in both offensive and defensive encounters.