Ola acquired Etergo BV, an Amsterdam-based electric scooter original equipment manufacturer for technology, by checking the patent portfolio where the company is already working on the same [1]. If not for acquisition, it would take approximately a period of ten years to develop the same technology. For example, Ather took five years to build the technology to make an electrical scooter[2]. We can understand that through this acquisition, Ola saved its time. 

Similarly, [3] Nokia will utilise the Windows Phone OS as its principal smartphone platform due to its “wide strategic collaboration” with Microsoft. Nokia’s application and content store will be merged into Microsoft Market Place, and the two firms’ assets will be combined to encourage innovation. Windows understand that Nokia has a platform for mobiles, so it wants to acquire with Nokia and make smartphones so that market can bet google who already made their stand with android. We can understand the importance of having a patent portfolio and technology transfer instead of developing the technology.

Developing a strong defense against Lawsuits and licensing demands

Permitting competitors to gain an innovation edge may spell doom for even the most powerful organisation. Costs and fines originating from IP licensing and lawsuits can quickly cost millions of dollars every year. These are two key sources of (quite justifiable) concern for a developing firm. The truth is that the best defence is typically a solid offensive regarding intellectual property. In the case of a competitor’s patent infringement litigation, a corporation with a robust and well-designed patent portfolio is well-positioned to countersue. As a result, they have a significantly lower chance of being sued in the first place. 

In recent decades, several of the world’s most well-known IT companies have built their names by swiftly taking a big chunk of their market rather than by inventing groundbreaking technologies. The ride-sharing businesses Uber and Lyft are great examples. Airbnb is another, and they gained significant market share (mainly) by delivering a service that many consumers needed. On the other hand, their products were a product of their period, made feasible by the technical advancement of the age in which the enterprises were created. Uber and Lyft created their companies in part by exploiting IP related to navigation, route planning, and so on that theoretically belonged to others, albeit unintentionally. This is to say, by infringing on a patent. This placed them in a dangerous position. 

Extensive enterprises, which often have extensive patent portfolios possessing hundreds and thousands of patents laid across various tech sectors, can yield plenty in annual revenue merely by licensing their technology to others and suing companies that infringe on their patents. Microsoft, LG, and Apple are all well-known instances of this paradigm. That is terrible news for Uber, a serial infringement. As if being the target of a business like HP or Google wasn’t bad enough, there are also “patent trolls”: non-practising organisations, or shell firms, that collect IP solely to monetise it through fees and litigation. Uber and Lyft were unlikely targets for IP owners trying to commercialise their patents when launched in 2009 and 2012, respectively. There is little purpose in utilising a relatively nameless firm with little resources. However, in 2013, this began to alter. By that year, Uber and Lyft were creating a lot of buzz in the market, and investors were pouring money in, making them more appealing targets for IP owners. Electronic Communication Technologies LLC, a patent troll, sued both companies that year. Since then, IP litigation against both ride-sharing businesses has piled up; five different companies have already sued Uber in 2019. Uber went public in May of this year. The fact that the industry has been the target of so much legal action this year follows a well-known pattern: patent infringement litigation against a firm tends to spike just after the IPO and the infusion of funding that comes with it. However, despite conventional understanding, we have seen that an upsurge in litigation frequently occurs after the IPO is publicised but before it occurs. This is logical, albeit cynical. 

The negative news may cause Wall Street to undervalue the firm, lowering the company’s final price-per-share. Getting entangled in a new lawsuit is a surefire way to create unfavourable press. Therefore firms on the verge of going public are generally motivated to settle lawsuits as soon as possible. Naturally, this is especially true for businesses that lack strong intellectual property portfolios and have little chance of successfully defending against a lawsuit. As a result, patent trolls who have nothing to gain by antagonising even high profile corporations come out of the woodwork at this moment, essentially mugging soon-to-be public companies for large settlements by filing cases they have no intention of pursuing. It is often enough for them to only threaten to sue. By the time Uber was prepared to go public, they had made a concerted effort to strengthen their position, acquiring more than 400 patent families and significantly improving the strength of their IP holdings. A single innovation was covered by each patent family or collection of patents. That rose from 37 patent families only a few years ago. However, giant corporations occasionally file IP cases before going public. Uber’s success was not enough to deter Google, which eventually settled with Uber for $245 million for infringing on technology owned by its subsidiary, Waymo. It is impossible to assess the settlement’s impact on Uber’s stock price, which fell short of expectations, but it drew much attention. And, while resolving lawsuits before an IPO is sometimes the best option for a firm with a weak patent portfolio, it is not an attractive one in general. [4]

Getting an Innovative Edge on Competitors

The core of innovation is inventions. Patents can be used to protect an innovation, which is a novel solution to a technological issue. By guaranteeing that an investor may control the economical use of innovation, patents safeguard the interests of inventors whose inventions are really revolutionary and commercially successful. A patent owner has the statutory right to prevent others from making, trading, selling, or buying the invention in question. This allows innovators to sell, barter, or license their patented innovations to others who may be interested in using them. The requirements for obtaining a patent are outlined in national IP laws, which may differ from one country to the next. However, in order to secure a patent, an inventor must show that their technique is unique (novel), beneficial, and not evident to others in the area. They must describe how their technology works and what it can achieve in order to do so. The patent can continue for up to 20 years, but in order for the patent to stay valid, the patent holder must pay specific fees regularly during that time. In actuality, if technology has low financial value, the patent holder may choose to renounce the patent when the invention becomes public domain and may be freely exploited. [5]

Defensive and Offensive Patent Strategy: Example Walmart and Amazon

A defensive patent strategy is a process of building a patent portfolio with the primary goal of reducing one’s exposure to legal challenges. Almost every firm of a specific size will want to read about the need if their business includes intellectual property. Getting sued is terrible for business, whether you have an IPO or not. However, many organisations are interested in developing an offensive patent strategy, which will allow them to earn cash through patent licensing fees and patent infringement lawsuits that they begin and give them a leg up on or catch up with their competitors. It’s not an either-or issue for the vast majority of businesses. Patent methods that are both offensive and defensive may and should be regarded as complementary and mutually reinforcing. Developing a patent strategy that focuses on forging new ground, on the other hand, might be difficult. Companies in almost every area compete to be the most creative these days. Many of them back it up by investing hundreds of millions of dollars in research and development. However, while everyone recognises the need to innovate, businesses lack a clear understanding of channelling their creative energy more often than you may imagine. They aren’t clear what they should be working on in terms of invention. As far as we’re particularly worried, figuring out the answer involves a complex, multistep process. We utilise it to direct our customers along the best path for them, and we’ll go over the process in more depth later in this piece. On the other hand, big corporations frequently develop tactics to improve their IP position by stealing queues from competitors. 

When Walmart’s president and CEO, Doug McMillon, told shareholders in 2017 that the retailer had “started to reinvent the future of shopping,” leveraging technology to do things like optimising, optimise “last-mile” delivery reinvent the future of shopping, he was referring in part to a progressive focus on intellectual property development that Walmart began in earnest around 2015. Until then, Walmart’s patent applications had been minimal and unchanging, except for a slight increase in 2011. And it’s not difficult to assume that Walmart’s leadership opted to imitate Amazon’s practices at some point, based on a side-by-side examination of patent filings by Walmart and Amazon, as well as the broader shift in Walmart’s company. After all, as the graph above illustrates, Amazon was once just an e-commerce platform with a shoddy IP position. They didn’t start filing patents rapidly until 2009, fifteen years after the firm was founded. The shift foreshadowed Amazon’s evolution into the multi-tentacled, trillion-dollar “everything” behemoth that it is today. (This is not to claim that Jeff Bezos lived on ramen noodles until 2009). It is hardly unexpected that Walmart, a brick-and-mortar shop founded in 1962, took longer to scale up its IP than Amazon, an Internet native. There are arguably worse models for success in the retail/e-commerce area for a massive firm than Amazon. It is not enough to merely mimic what successful rivals have done; by evaluating successful competitors’ patent filings, a firm may get vital knowledge with which to design its future. As a result, when firms come to us for advice on how to jumpstart their patent portfolio, especially if they’re a little behind the curve in terms of innovation, our first recommendation is almost always to do a patent landscape study. It is a specialised method that provides a picture of all existing and pending patents in a specific sector or industry, a glimpse of what all other firms working in that field are focusing on. In the next section, we will explain why and recommend further measures.

Conclusion: Consistently, we need to understand that knowing your investing company is essential. Sometimes choosing to do innovative work is appreciable compared to doing hard work. In the same way, when you want to expand or upgrade the business selecting a company with a good patent portfolio or technology transfer through acquisitions is the better option when compared to developing the technology. It reduces the time consumption to develop the technology and preserves the resources invested in innovation. A company should always choose the one that is a more satisfactory choice.

Disclaimer: The present article intends to provide general guidance on the subject, and you can also consult us in your specific case.

References: [1] https://www.business-standard.com/article/companies/ola-electric-to-launch-global-electric-two-wheeler-buys-dutch-scooter-firm-120052701506_1.html

[2] https://en.wikipedia.org/wiki/Ather_Energy

[3] https://www.marketingweek.com/nokia-to-partner-with-microsoft-under-new-structure/

[4] https://www.greyb.com/patent-portfolio-strategy/

[5] https://www.wipo.int/ip-outreach/en/ipday/2017/innovation_and_intellectual_property.html

Author

  • Title

    Suma Sri is a law student exploring various streams of law along with her enthusiasm towards IPR. Her interests dwell in ADR. She is also into NGO activities. She has good knowledge of legal research. She has experience in writing articles and blogs. Currently, she is pursuing her bachelor's of B.B.A.LL.B(Hons.) in ICFAI University, Hyderabad.