Lure the Tiger Out of the Mountain: Patents and Market Share
July 12, 2022
By Robert Cantrell - Registered Patent Agent
An essential element of competitive strategy is to field an asymmetrical advantage. Asymmetry allows you to do unto your opponent what your opponent cannot do unto you. Countless examples present themselves across history and professional disciplines. The English army fielded a long-range, hard-hitting longbow against French knights at Agincourt on October 25, 1415, to defeat superior French armor. Presently, no adversary on the planet can park an aircraft carrier off the American coast and expect it to operate in a hostile way longer than 23 seconds. And in the patent world, those who have patents on an essential technology can prove highly disruptive to competitors operating without comparable patents.
Often, asymmetry arises when a first opponent induces a second opponent to compete on the terms of the first. Such happened with STAC ELECTRONICS v. MICROSOFT CORPORATION in 1993. STAC was poorly positioned to compete against Microsoft in the market without fielding an asymmetrical advantage. That asymmetrical advantage resided in patent US 4,701,745, which claimed essential elements of STAC’s superior data compression technology. The patent supported a $120 million verdict on infringement in favor of STAC. That verdict allowed STAC to negotiate a favorable position in the market. The verdict also spurred an initiative by Bill Gates at Microsoft to build a significant patent portfolio at his company backed by a sophisticated and nuanced patent strategy. The patent strategy became an integral part of Microsoft’s business strategy.
A business strategy for an enterprise ultimately points to how the enterprise earns sales. Behind every sale made by an innovator company is a business operation comprising MBA fundamentals of finance, marketing, accounting, economics, organizational behavior, quantitative methods, and strategic planning. Also included are the fundamentals of intellectual property strategy, of which the patent is a part. Any one of these fundamentals presents opportunities to leverage asymmetrical advantages, which, if understood and employed, can entice competitors to compete where you hold an advantage. For example, it is hard for an upstart competitor to compete with you on price if you have advantages in economy of scale. Conversely, it may be hard for an established competitor to compete on price if you can operate without a comparable overhead.
Each employed asymmetry can translate to more and better sales.
Salespeople, the people at the cutting edge of business, love asymmetrical advantages. How nice it is, for example, to sell a product everyone wants, and no competitor has. The right to enforce exclusivity afforded by a patent can establish that ideal. That exclusivity becomes decisive when backed by the other MBA fundamentals in a properly resourced and positioned business operation.
By Jose W. Jimenez, Esq – Former Chief Patent Counsel & Registered Patent Attorney
In Robert’s example, STAT decided to purposefully engage Microsoft in patent litigation and in so doing secured a substantial patent infringement award that allowed STAC to use those funds to secure a better position in the market. But what if you cannot expend such funds in litigation or if your management does not support such an aggressive move? What are your options?
If used properly, patent office procedures such as Interferences, Reexaminations, Post-Grant proceedings and Inter Party proceedings provide those options for in-house counsel at smaller companies or start-ups at a tenth of the cost and with much less risk. These procedures allow you to engage your competitor on your terms once you have worked out your strategy ahead of time with your patent litigation counsel.
My predecessor at AMS was able to engage J&J in an interference proceeding on a patent application that was important to their Female Pelvic health business. As the requests for discovery grew, and the parties further engaged in the process, J&J quickly came to the conclusion that for them, proceeding was more of a distraction and the documents being produced and publicly displayed would be unfavorable to them. Hence, the parties worked out a settlement that included a cross-license that allowed both parties to focus on competing in the marketplace instead. This license agreement would later open the door for AMS to quickly grow market share as AMS’ clinic expertise, knowledge of the 510K process, and close relationships with physician customers lead to launching new products well ahead of the competition.
Whether you are dealing with Tony the Tiger® (Kellogg), a Tiger in your Tank® (Exxon) or the Galaxy Tiger (Samsung), and if you are not so sure what to do, give us a call to discuss your options.
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