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Post-Recession Planning for Your IP: Rescuing Your Company's IP Value from the Budget Hatchet

May 2009

By: Susan G. L. Glovsky

Hamilton Brook Smith Reynolds Alert

Memoranda from coast-to-coast read, “Your patent budget has just been slashed, execute kill instructions now.”* IP patent portfolio managers and in-house patent counsel must determine what intellectual property to rescue from the budget hatchet. This is the most significant assignment this quarter. The goal is to assure that the kill instructions executed today do not prevent enforcement in the future against competitors taking advantage of unfortunate steps taken during the bad times.

In the present economy, IP cannot be managed in a spend as usual fashion. Protection that would have been automatically obtained and maintained must now be scrutinized, using less to protect critical IP in order to maintain a competitive advantage and to free up funds to protect future developments. Scrutiny requires identification of current and future commercially successful products, consideration of the relevant markets, understanding protection available, and knowing associated costs. The company then has to use this information to make important decisions that allow for survival through the lean times and success in the future.

Protecting Existing Core Technology

Traditionally, cost cutting has sent IP managers and counsel to scientists, engineers, and chief technology officers to identify and protect core technology. But “core technology” may be too broad for the resources available for IP protection. To narrow “core technology” to only the essential technology the company can afford to protect, IP managers and counsel must enlist business, sales, and management professionals as well as chief technology officers in order to make intelligent forward looking decisions, taking into account the future of the company and the demand in the marketplace.

Protecting Cutting Edge Technology

The analysis of essential technology protection must account for the need to free up enough money to be able to protect technology being developed. The ability to prevent competitors from taking advantage of new developments can be of greater value than maintaining protection of earlier, possibly outmoded, technology. This is particularly true where the marketplace has moved away from the earlier technology or competitors have determined how to avoid infringing the IP protection for earlier technology.

To develop and protect cutting edge technology, companies must identify problems with existing technology, what solutions are available, what solutions will be commercially viable and successful, what value to protect, and how to protect it.

Protecting on a Reduced Budget

With the IP value to protect identified, it is necessary to determine cost-effective steps to protect it. Survival depends on fast thinking and quick action to assure protection with resources now available.

Taking Advantage of Trade Secrets

Trade secret protection, if properly maintained by consistent practices, is a less expensive way to maintain IP protection for developments that can be kept secret. For those who have been waiting for a rainy day to review trade secret practices and procedures and implement additional protection, it’s raining. During the downturn it would be prudent to audit and improve company procedures for trade secret protection, and to assure their consistent implementation through training. Trade secret protection is appropriate for processes and compositions that cannot be reverse engineered or duplicated by third parties who study your company’s products.

It is necessary to recognize that company cost cutting measures can result in the loss of some of the most innovative and productive employees of the company. In the course of making difficult decisions, it is necessary to consider future needs the company may have for employees’ contributions in pending IP applications or litigation.

Exit interviews need to be conducted to prevent trade secrets from leaving with departing employees. Your company needs to take possession of computers, data on home computers, PDAs, laboratory notebooks, invention documents, and other information that is
important to the company. Departing employees also should be reminded of obligations arising from employment contracts and from invention and trade secret documents, including agreements to cooperate in continuing patent prosecution. For some of the exit interviews, it may be prudent to include IP managers and counsel in planning for the departure, and it may be best to include an IP representative at the exit interview.

Copyright Protection for Minimal Investment

Copyright protection exists once the work is created, requiring no expense. Works protectable by copyright include written materials, software, and, in certain instances, compilations of data. For works that are distributed outside of your company, copyright notice should be placed on the works so that third parties will be aware that the works are protected by copyright. There is essentially no expense to place copyright notices on copyrightable subject matter. A form of notice that is generally sufficient worldwide is “© [name of owner], [year], All Rights Reserved.” There is limited expense for registering the copyright in works that are of particular value. These practices, once established, can be handled by properly trained staff in your company.

Trademark Protection Based on Use

Use of a trademark in U.S. interstate commerce begins accruing common law rights to the company in the geographical location and for the goods or services for which the mark is used, even without the filing of an application to register the trademark. Using a trademark that belongs to someone else can be very costly. Therefore, when money is tight, you may take the risk of not registering the trademark, but make sure a competent search is performed to determine that the mark is available before the mark is used. This makes it less likely that it will be necessary to rebrand after receiving a threatening letter from another company. Before obtaining a more costly full formal search, conduct an informal screen for conflicting marks on the USPTO website or at In addition, be sure the .com web address with that trademark is available if it is going to be desired at any time, and secure the web address, which is an inexpensive investment. To the extent money is available, secure typographical errors for the web address, addresses with additional endings like .net, 800 numbers, international web addresses, and other ways that people could mistakenly try to find your company once the trademark becomes popular.

When applying to register trademarks, there are procedures and strategies available to accomplish U.S. and foreign filings that are more economical. U.S. electronic filings or international filings under the Madrid Protocol may be the best ways to proceed in certain circumstances. The goal is to select the procedure that results in protection in the most important countries for the commercial products for the lowest cost.

It is also necessary to assess trademark registrations the company has in order to determine if they are for trademarks that are still being used, and in countries that are of continued benefit to the company. This is where intelligence from within the company on relevant markets is critical. Continuing to maintain protection in countries where your company has minimal market share is money that is being wasted.

Pulling Back Patent Dollars Wisely

It is extremely important for IP managers and counsel to understand where patent dollars are going in order to determine where prudent cuts can be made. Dollars saved can be invested in technology of others that is being sold at fire sales. It also can be invested in protecting cutting edge technology developed by a workforce that has been redeployed to research and development awaiting better market conditions for manufacturing and selling products. The patent dollars to examine are:

  • Maintenance fees and annuities increase over the life of a patent. Paying these costs for patents that no longer cover commercially viable technology is not money well spent. It is critical that these expenditures be evaluated immediately to pull money back into the budget to be used to protect company value.
  • Obtaining patents outside the United States requires a smaller initial investment at the outset, but balloons after the application has been pending for more than a couple of years. The decreased value of the dollar has increased these costs significantly. In the current economic climate it is important to determine whether the company is likely to reap the benefit of the investment in the countries where it is being made, and know what the cost of the protection is.
  • In the United States, a sharper pencil needs to be taken to pending applications to assure they are directed to inventions that are still vital to the company’s success.
  • Before killing any protection, determine the possible value the protection may have to another company that may see the technology as the future for their commercial success and is willing to pay for the protection created.

Success in the Present Economy

After the recession, your company needs to have IP protection to assure its position in the market. In the present economy, it is critical to be proactive to maximize protection with the resources available. Gathering information, identifying value, determining costs, developing and executing a strategy, and making difficult decisions are keys to success. A crystal ball would help.

* If you are in the enviable position of having a budget surplus, remember it is a buyer’s market. Look at acquiring companies or their IP.