Creating Competitive Advantages Through An Effective IP Portfolio

Companies are always looking for a “leg-up” in the
marketplace. Successful techniques for achieving that competitive advantage can
often be elusive, especially in fast moving, technology driven businesses.

In-house counsel can be crucial to helping an organization
be competitive by helping to create (lawful) third-party barriers to entry.

The importance of synchronizing an organization’s business
and legal goals cannot be overstated. An in house legal department, and in particular
and in house intellectual property group can be an effective tool in advancing
the business and helping management set up a systematic plan for addressing the
competitive environment.

Barriers to entry generally come in three flavors:
regulatory, contractual and intellectual property – the last being the only
type whose creation is fully within the control of the company. Regulatory
barriers are creatures of governmental policy and action. Although an
organization, through successful lobbying, might hope to influence policy, it
certainly doesn’t control it.

Contractual barriers (e.g., preferred purchasing and sale
agreements) are always dependent on motivated and capable partners – a
sometimes-scarce commodity.

Intellectual property barriers are a result of the company’s
own hard work and innovation. As such, they can be flexible and valuable tools.

The term intellectual property generally applies to four
kinds of rights: patents, which protect new and useful ideas; copyrights, which
protect tangible expressions of ideas (books, movies, software, etc.);
trademarks, which are used to protect the association of a particular name or
type of packaging with your product; and trade secrets, which protect
confidential company information that may give you a competitive advantage
(e.g., a secret formula/process or even a customer list).

But how you create an effective IP portfolio that really
gives the business an advantage in the marketplace? The answer: One step at a
time.

A “tiered” approach can be both very simple to implement and
effective in getting an organization where it needs to go.

Step 1: Protect Your Current Products

Nothing is as frustrating (or as damaging to a business) as
having a competitor knock-off your product – whether copying your software,
mimicking your product packaging or reverse engineering your invention.

The first thing you must do when creating an IP portfolio,
is make sure that you have adequate intellectual property protection for the
product or service that you sell. Basically, create an intellectual property
“house” for your business.

The steps in-house counsel should undertake are often very
straightforward. Register the copyrights of any written materials and computer
software. Register any unique product or service names or distinctive product
packaging. File patent applications that claim the products or processes that
are key to your business.

Such simple steps create basic barriers to entry by
preventing “copy-cat competitors” from entering the marketplace unopposed.

Step 2: Protect The Products Being Developed

Merely building an IP enclosure around your current product
offerings is probably not enough. What you really want to protect is your
business model. This entails thinking more strategically about your current and
future products and services, as well as creating an IP portfolio in
anticipation of where the business is going.

File trademark applications based on you “intent to use” a
mark. Register your software copyrights as you develop the code and prior to
general release. File patent applications on products that are currently in
development with claims that cover different potential aspects of your product.
Such an approach provides disincentives for competitors getting too close to
your business model. Good fences make good neighbors.

Step 3: Protect The Company’s ‘Core’ Mission

In a rapidly changing environment, it’s not about the
business you are in, it’s about the business you want to be in. The goal
is to create barriers to entry that are sufficiently broad and prospective.
Such a task, much like planning an entire city, can be very difficult.

To accomplish this the focus must shift from the products or
services that the business markets, to those things that are truly “core” to
the organization’s existence and which makes it unique. In technology driven
companies, this is generally a technology platform.

Counsel should reorient the organization’s thinking to
address the entire universe of things that can be done using its “core”
technology, whether such activities are in the organization’s current business
space or not.

For example, one can build an appropriately strong patent
portfolio that covers such things as: the technology that the company is
currently using; products that will be and can be made using that
technology by either competitors, suppliers or customers; processes that may
implement (in whole or in part) that technology; and potential uses of that
technology in industries that are both similar and radically different from the
one the company is currently in.

In this way an organization can truly stake out it’s
territory and provide itself a buffer zone of protection around its business.
Such flexibility allows for future changes in strategic direction while
supporting the current business.

Step 4: Addressing Third Party Activities

The mere presence of a trademark or copyright registration,
or of an issued patent, may serve to hold competitors at bay or it may not. The
reality is that IP portfolios are only truly valuable if they are put to work.
Sometimes this entails actively licensing trademarks or key patents to parties
that are in complementary businesses.

Other times, an organization makes a strategic decision to
get out of a particular line of business, yet it still holds key intellectual
property in that area. An active licensing program is often helpful in those
situations as well.

Often, however, the only way to see a return on your
investment and keep competitors at bay is to actively assert your intellectual
property rights. This can take many forms including: trademark oppositions and
litigations; patent infringement suits, interferences, reexaminations and
foreign oppositions; or copyright infringement and trade secret
misappropriation lawsuits. Smart timing and the right assertion strategy can
often make the difference between being an industry leader or an industry
laggard.

George A. Xixis is a partner at Nutter McClennen &
Fish LLP, in Boston, and is co-chair of the firm’s Life Science practice group
and former chief IP counsel of a biotech company.