C3 Patent and Intellectual Property Law

Jun042009 | Steve O'Donnell

The value of a patent application itself

In an earlier post I noted that there is a competitive advantage in the application itself, even if a patent never issues or if the final patent is so narrow that it can be easily designed around. What is this advantage and how can it be used to benefit your business?

The first advantage is somewhat tangential to the application. An application or narrow patent will count towards your business' intangible assets (assets that aren't. . . ahem. . . tangible, things that can't be touched). Increasing a business' assets will make it more attractive to lenders or investors, which in turn can mean increased capital available to take on the competition.

The other advantage is that is puts the competition on notice that copying the invention may be foolish. After an application is filed, the patentee has the right, under 35 U.S.C. § 292 to mark a product as “patent pending” or similar. This by itself alerts potential infringers that the product might be later patented, and they could face an infringement lawsuit if they copy the product. Also, because applications are held in confidence for the first 18 months after they are filed, the competitor has no way of finding out what the subject matter of the application is.

Consider you invent a gadget and, after consulting with your patent attorney, decide to pursue a patent on one small aspect of it, after filing, you can use mark it as “patent pending.” A competitor wants to copy it, but has no way of finding out what the application covers or its likelihood of issuing. Now, the decision to copy becomes more complicated because of the uncertainty and the possibility of being hit with an infringement lawsuit.

This same type of “persuasive protection” comes up again when the application is published 18 months after filing. Here, as was the case with the “square appliances” application, possible infringers have a better idea what the patentee is trying to protect, but still no idea if the patent will eventually issue or exactly what it might cover. Additionally, the possible infringer should also realize that there might be other related patent applications haven't been published yet (as can happen with a continuation application).

In the case where a patent has to be very narrow in order to get past the examiner, this still has value beyond the legal monopoly it grants the patentee. Possible infringers probably don't have the patent background to analyze the patent and discern what it covers, so they'll need to have their lawyers work on it and draft an infringement opinion. Depending on the complexity of the patent, even if it is rather narrow, these opinions can quickly turn into tens of thousands of dollars. That might be enough to either dissuade the possible infringer or bring them to the table for a possible license.