Patents – and IP in general – are big business. One way or another, patents make money for their owners; whether that's from the products they enable or from license fees they generate. But there's another value to patents, one of which has been demonstrated recently in no uncertain terms: the right IP is worth an awful lot of money when sold.
Two recent deals highlight this. Nortel, the bankrupt Canadian telecoms company, held a serious IP portfolio. Between them, Apple, Microsoft, Research in Motion and another four companies spent $4.5billion on 6000 patents.
In an even bigger deal, Google bought handset developer Motorola Mobility for $12.5bn. Getting its hands on a handset developer was an important part of the transaction, but the company's 17,000 issued patents, with another 7500 pending, were the real target; many fundamental to mobile phone technology and Android. Meanwhile, in an interesting twist, Google has given patents to mobile phone developer HTC so that it can sue Apple.
All this activity has planted the idea amongst some observers that innovation has now taken a back seat to patent exploitation as a more effective way of growing corporate revenues.
Patenting ideas is, of course, nothing new. What could be seen as a patent was described in 500BC in Greece. The Republic of Venice passed patent laws in 1474 and the UK issued the Statute of Monopolies in 1623, which referred to 'projects of new invention'. And at the beginning of the 18th Century, England required a written description of the invention.
As far as the UK is concerned, the Patent Office was established in 1852 as the sole source of patents, even though the patent system in the UK can be traced back much further than that. Before that came the Designs Registry, set up in 1839 to protect industrial designs. The Patent Office changed its name to the Intellectual Property Office (IPO) in 2007.
A patent is a right granted by a government to an inventor that protects their work for a limited period. The right prevents others from using, selling or otherwise taking advantage of the design without the inventor's permission.
While requirements vary across the globe, patents are usually granted for inventions which may be new, non obvious, useful and industrially applicable.
A leading patent attorney is D Young & Co LLP. Anthony Albutt, a partner in the company's Electronics, Engineering and IT Group, said a patent is something which protects a technical feature. "But you can't patent a discovery; something that is already there."
What is Albutt's role in the process? "The patent attorney is the connection between the inventor and the IPO," he said. "We talk with the inventor, draw out the innovation and then write the application." After that, he said, a patent attorney will argue with the IPO to get the patent granted. While the word 'argue' is used in the legal sense, you get the feeling that it has a broader meaning in some instances.
"We can also represent companies in Europe and around the world, as well as before UK courts," he added. "It's an unusual profession; you certainly need a technical background. But you also have to undergo legal training and stiff exams before you can practise."
Albutt's company tends to work with blue chip companies, such as ARM and Sony, but it also manages trademark issues for Ferrari and Jamie Oliver. "We also work with universities and small companies," he continued, "and these are the kind of people who tend to miss out on patent and IP protection."
A range of protection is available to companies. Alongside a patent for a new invention, companies can also receive protection for their trademarks and the way a product looks. "And there is also copyright, which applies to artistic creation," Albutt continued. "Companies can protect each aspect separately and in combination."
Albutt said he worried about small companies and their apparent lack of involvement in the patenting process. "If you haven't got protection, your design will be copied," he highlighted. "Many companies miss out and we, as professionals, think that providing guidance to these companies is important."
But one thing is certain: the patent process is complex and can be drawn out. Getting protection for a trademark is probably the quickest process. "It's quick and fees are low," said Albutt. "Just submit an image and you'll get protection within a year." A patent, however, is different. "It depends on how complicated the product is. A complex application could be 100 pages long and the process can take four years; longer, if you're looking for a European patent."
Once the application is written and submitted, the IPO starts its search process, working out whether the application really does describe something that is new. "It's then we start the argument," Albutt said. "But once you have made the claim, you have rights to the design from that date."
What will speed the process is if your design is 'green'. "If an innovation saves energy," Albutt pointed out, "you will get a grant within a year."
When should you talk to a patent attorney? "As soon as you have a reasonable idea of what the product is," he continued. "But you must do this before you disclose; whatever you do, do not disclose outside of a confidential agreement."
He pointed to a company developing home entertainment systems. "It had a great idea, which it wanted to patent. But it had exhibited at a trade fair and that meant it had disclosed. It's the same old story, unfortunately; people don't understand IP and how it can be used."
Having said that, Albutt admitted most companies are 'generally aware' of patents and trademarks, but added 'the process may not be so clear'. "What many companies get wrong is the fact that a patent only stops someone else doing something in one country. There is no such thing as an international patent; you have to apply in each territory where you want protection."
He also said there was confusion between what qualifies as being patentable and what is more appropriate for design protection. "A new chip design – essentially a flow diagram – would be patentable, but if the innovation covers how a product sits in the hand, for example, design protection is more appropriate. The commercial advantage to a company may well be in the way a product looks, so companies must ask themselves where they see the commercial value of the development: where they see themselves making money."
That money may not come from an obvious source, he continued. "I had a university spin out as a client. Its investors wanted to get out earlier than planned, so it had to change the IP strategy from keeping competitors away to licensing its technology." The lesson? Patents have a value, but that value may be different to the one you thought it would have.
Part of the confusion is the fact that small companies believe patents are something for big companies. "That's wrong," he asserted. "They are valuable to small companies and they are not making the most of their opportunities.
"It is something of a Catch 22," he admitted. "Companies may say 'we don't have the money to get a design protected', but they should ask whether they can afford not to. ARM, when it started, had the foresight to put money away to protect what it did."
Patent attorneys aren't always found in London. "There are small companies around the country," Albutt said. "But, as a product becomes more valuable, companies tend to end up coming to a London based practice."
While having the obvious benefit of protecting your design, a patent can be used in a number of ways; some less obvious. "IP can certainly protect your market," he said, "but it can also make you money through licensing. If a company isn't interested in selling a product in, for example, Italy, it could license technology to an Italian company. Or the IP could be used as a cross license; you might have a patent for one thing, while another company may have complementary technology. Cross licensing would allow the companies to work together, maybe in different markets and using different brands."
And a patent protects your market. "If your design is copied, you can take the copier to court and you should get damages that compensate for lost opportunities."
After five years, you have to pay an annual fee for the patent to remain 'alive', with a maximum term of 20 years. "So, unless you make money from your invention, you may not bother to renew," Albutt said. "That can make technology more widely available. There's a wealth of technology where patents are not in force and you may save your company money by finding technology in a lapsed patent."
If, during the process of the patent application, part of your idea is found to contain what's called 'prior art' valid in the UK, you have a problem. "You have to think about the way forward," Albutt said. "You might have to change the design, you might investigate the cross license route or you might just give up. But you can also challenge the patent and try to have it invalidated. That last option has a lot of danger, but a lot of opportunity."
If you don't renew, the opportunity opens up of selling the patent. Step forward the so called 'patent trolls', more correctly termed 'non practising entities'.
In its most aggressive form, the 'troll' has been around for at least a decade, buying patents from a range of sources and then pursuing license fees. In a more benign interpretation, the troll is actually a company looking to license technology developed in house, but which is not being used.
Albutt admitted that D Young represents a troll. "They tend to look for where the biggest infringements will be," he said, "but if you're an inventor in a small company and you can sell your IP for, say, £1million, why should the purchaser not benefit?"
Because many products – particularly those aimed at consumers – draw on many patents, it's not always obvious to the designer that they are infringing someone else's work.
"In the end," Albutt concluded, "companies need to ask themselves 'why are customers coming to us?'. When you can answer that, you'll know what you need to protect. That may not be the 'clever bit'. You need to work out what it is that other companies might try to copy."
The Chartered Institute of Patent Attorneys holds regular clinics at a number of sites around the UK, giving free basic advice to innovators who are at the early stages of developing an idea. The clinics are all given by a registered patent attorney who is a member of CIPA.
Topics can include:
• assistance in constructing a search strategy for patents, trade marks or registered design;
• referral to other agencies for help and funding; and
• basic guidance on procedures for registration of IP rights.
According to Albutt: "You can get a lot from an hour with a patent attorney, provided you come along with a sensible approach to disclosure."