There has been a long-standing debate between the risks and benefits of patent searching. For most R&D, marketing, and business managers, the benefits of searching patent information are unquestioned. However, legal counsel (including patent attorneys) often disagree, arguing that the potential risks outweigh the benefits. And while IP Checkups stands firmly in the camp of more benefits than risks, we’re using this opportunity to detail both sides of the debate.
Two of the three main risks relate to legal principals. Those are:
- Willful infringement and the potential for enhanced damages
- The duty to disclose rule and the possibility of claims of inequitable conduct
And, the third risk is that patent searching is simply a waste of time.
Although there are many benefits associated with patent searching to be discussed in this paper, the fundamental benefits relate to:
- Reducing redundant research and risk of infringement
- Gaining insight into competitor activity
- Speeding up the time to commercialization
- Increase licensing and other patent monetization opportunities.
This article will summarize the risks and benefits associated with searching patents and scientific literature. No quantitative assessment as to a determination of whether or not to search the patent and scientific literature will be made as each commercial enterprise faces significantly different scenarios. However, compiling and analyzing each specific risk and benefit will allow for a meaningful discussion to ensure that the best possible decisions, short and long-term, are made for the corporate enterprise.
Prior to the 1990s when patents became available in electronic format, patent owners had limited options to perform a patent search. One possibility was to visit the United States Patent and Trademark Office (USPTO) in Arlington, Virginia and physically thumb through paper patents. Alternatively, one could order copies of patents to be mailed directly to their location. Both of these options were time consuming and expensive. So aside from patent examiners at the USPTO, most people didn’t search for patents. In fact, the purpose of a patent search at that time was strictly related to three legal focused issues:
- Patentability – To determine whether other prior art such as published patents and patent applications, scientific papers, product brochures, or other publications existed prior to the filing of a new patent application that would impact the ability for a new idea to become a granted patent.
- Validity – To determine whether or not the claims of a granted, in-force patent could be challenged or overturned based on a prior art publication.
- Infringement – To determine whether the limitations of each claim of a granted patent is literally found in a product or process, enabling the patent owner to stop others from making, using, or selling the product.
Opportunities to mine patent information for competitive intelligence, R&D, and marketing purposes hardly existed until the early 1990s. At that point, companies such as Aurigin Systems (Smart Patents), Micropatent, and IBM began making patent information available in electronic format. Suddenly, corporations were able to gain quick and affordable access to see who the key companies and inventors were, what innovations they were working on, plus where and when they were filing.
Today there are millions of patents and technical papers available online in searchable format. In 2017 alone, there were upwards of 3 million patent applications filed worldwide. Considering this massive repository of publicly available technical information, why do some patent attorneys continue to recommend that clients don’t search for patents?
Risks of Searching Patents and Scientific Literature
Some legal counsel and patent attorneys often recommend that companies do not search for patents. And, in some cases companies create a policy restricting engineers from searching for patents. Although this seems counterintuitive during a time when the amount of information available is greater than it’s ever been, there are legal issues harkening back many decades that attorneys use to support their position. In certain industries, engineers and investors also argue that patent searching is simply a waste of time.
Below, we outline three common risks associated with patent searching.
Risk 1: Patent searching is waste of time.
This position, held by some attorneys, technical experts, and investors is principally associated with industries where product features are frequently updated or changed, such as in software and high-tech. The argument is founded on the ideas that:
- The product development cycles in certain industries occur very rapidly. By the time the patent grants (~2 to 3 years from filing) the product features the patent protects will be outdated. Therefore, searching for and in many cases filing a patent is not worth the time and effort. This is a common approach for companies developing software for smart phones, web-apps, or automobiles.
- Because so many patents are filed in rapidly evolving technology areas, there is likely a thicket of patent filings, with many overlapping rights, resulting in minimal benefits from patent searching.
- No matter how much searching one does, they won’t find everything.
The reasoning behind each of these arguments is not irrational and there is some truth to all three points. Common counter arguments include:
- Although many features will quickly become outdated, some core features may have a lasting impact on the product and the market. Because it is difficult to tell which features will become core and which will fade away, the benefits of searching to learn from analyzing competitors patent filings outweigh these risks.
- Patent information provides an extremely rich corpus of technical information. IP Checkups and others have pointed out that 80% of published science and technology information contained in patents is not published anywhere else. And, in a highly competitive market, it is critical to gather as much information as possible.
- Although searching might not reveal every related patent, a good search performed by a professional searcher should reveal 90% of all relevant disclosures. This results in more certainty around the state of the technology compared to simply burying one’s head in the sand.
Risk 2: Duty to Disclose and Inequitable Conduct
The second risk is based on a legal argument. The United States Patent and Trademark Office (USPTO) requires that upon submission of a patent application and throughout its prosecution the applicant must provide the USPTO all pertinent prior art references known to the applicant. This is often referred to as the duty to disclose.
The consequences of not meeting this obligation (known as “inequitable conduct”) could include invalidation of a patent derived from the application in question and possible disbarment of legal counsel associated with the preparation and prosecution of the application. In the context of patent litigation, it is a well-known tactic that defendants use the duty of disclosure argument against a competitor as a strategy for invalidating a patent.
Patent attorneys often cite the threat of inequitable conduct that stems from the duty to disclose requirement as a reason for their own teams to not search for patents.
One argument goes, if the applicant never searches for patents she will never find “pertinent” prior art references and therefore she cannot be accused of inequitable conduct. So rather than recommending an applicant searches for patents, it is less risky to not search for patents at all.
The other argument is that if the applicant searches for prior art and determines that a reference is not pertinent to their invention (and therefore doesn’t disclose it to the patent office during the prosecution of the patent application), it may open the door in the future for a defendant in a patent infringement lawsuit to allege inequitable conduct. Thus, the argument goes, it is safer not to search for patents.
These are not illogical arguments, but they require the inventor to ignore immense amounts of potentially relevant information. This approach makes more sense in a bygone era where patent information was only available in a printed format at the patent office as opposed to being freely available, online in a searchable format.
Now that the information is available on the internet, it seems risky to ignore. Some attorneys believe if there were no duty disclose, everyone would search for patents, but because there is an obligation to disclose what is found, it discourages people from looking.
In an article entitled “Conversations With Two Chief Judges” by Matthew J Dowd from the law firm of Wiley Rein, LLP, in Medical Innovations and Business pages 60 – 71 Summer 2010 – former Chief Judge of the United States Court of Appeals for the Federal Circuit, Paul Michel states
“… I think the purported search concern as it relates to inequitable conduct is overstated. Again it’s a few people talking about an isolated case here and there that is not the norm. No statistical support has ever shown, to my knowledge, that it’s a big problem. For example, the law has been well-settled for decades that cumulative prior art references need not be disclosed to the Patent Office. Most relevant prior art references are cumulative. So, what’s your obligation? You’ve got to submit the closest prior art. Anything that’s less close doesn’t need to be put in. The idea that people are being forced to dump thousands of prior art references on the examiners seems artificial and practically phony. On the other hand, I think sometimes some killer prior art isn’t disclosed. Where that occurs, of course, there should be careful consideration of inequitable conduct, which of course requires deceptive intent as well as significant materiality. But, I think the problem is very overstated. I do think the Federal Circuit could clarify its case law in a way that would be very helpful because we have too many different standards of materiality. I think that’s a fair criticism of our court, and I would love to see the court go en-banc to clarify the materiality standard.”
Risk 3: Willful infringement and Enhanced Damages
Another risk of particular concern to legal counsel relates to the potential for increased, or “enhanced” damages that can be awarded for knowingly infringing a patent. Patent infringement can occur without knowledge that a granted patent exists, which provides the patent owner with a legal remedy to allege infringement, potentially preventing others from practicing the claimed invention. When it can be shown that the infringement occurred with knowledge of the existing patent (i.e. willful infringement) damages awarded to the plaintiff can be trebled (tripled).
Recovery for patent infringement is governed by 35 U.S.C. § 284, which provides: “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. When the damages are not found by a jury, the court shall assess them. In either event, the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C.§ 285 adds that “the court in exceptional cases may award reasonable attorney’s fees to the prevailing parties. The total award to a claimant, therefore, may include damages, interest, increased damages, costs and attorney’s fees.”
Although it is fairly common that those seeking infringement damages will allege that the infringement was not just negligent but actually willful, a very small percentage of these cases actually reach a final decision on the merits on willfulness. Several academic papers have been written detailing this point.
IP Checkups has recently reviewed several academic papers and other published literature related to willful infringement and enhanced damages. We found that:
- From 1983 through July of 2017 tens of thousands of patent litigation lawsuits were filed in the US
- Between 3-5 percent of all patent infringement claims are decided at trial (most settle or are dismissed)
- A very small percentage of these cases reach a final decision on the merits on willfulness:
- 1% of all cases terminated in 1999-2000
- 9% of all patent cases filed between 2005 and 2010
- A very small percentage of these cases reach a final decision on the merits on willfulness:
It appears clear that although patent attorneys often suggest that willful infringement and enhanced damages are outcomes associated with searching for patents, about ten in 10,000 patent lawsuits (.001%) result in a finding of willful infringement and enhanced damages.
Furthermore, in one paper called Willful Patent Infringement and Enhanced Damages After In re Seagate: An Empirical Study, author Christopher B. Seamen from Washington and Lee University law school, found that most (over 70%) enhanced-damages awards were for double damages or less.
When looking at the largest initial patent damages ever awarded to patent holders in the US, the threat of being sued for patent infringement appears to be a serious concern (see table 1 below). But look closer. It’s no coincidence that the largest patent damages ever awarded impact some of the world’s largest companies. Due to massive amounts of revenue, these companies are at the most risk of being hit with large damage awards in the U.S. and are best positioned to handle the financial burden of a large damage awarded against them.
A closer look reveals the following:
- The damages in these cases were calculated based on very large revenues derived from very successful products (i.e. Hepatitis C drugs, Smartphone software etc.) but in most cases do not include enhanced damage awards.
- The damages from these large patent awards are quite small compared to the defendant’s In fact, all but one of the defendants on the list had a market cap of at least $30B at the time of the judgement.
- Considering these massive market caps, the total damage awards accounted for two percent or less of the total market capitalization of 80 percent of the defendants at the time of the damage award.
This handful of very large, headline grabbing damage awards during the past 20 years, along with the three risks outlined above are the prime reasons why patent attorneys often recommend that their clients don’t search for patents.
Most recently, in a fascinating court case in the eastern district of Texas (Motiva Patents LLC v. HTC Corporation), Judge Rodney Gilstrap opined that not searching for patents or having a policy of willful blindness is sufficient for making a claim for willful infringement. If the potential risk of searching for patents (willful infringement) is the same risk of having a policy to NOT search for patents (willful infringement), the benefits of searching for patents seems like the only choice. IP Checkups outlines a plan for maximizing opportunities and minimizing risks related to this issue.
While avoiding risk is important, business executives, R&D, and marketing personnel understand that great rewards do not come without taking risks. Using publicly available information found from patent searching provides opportunities to increase rewards while offering numerous benefits to the modern innovative company, many of which are outlined below.
Benefits of Searching Patent Literature
“I think any chief patent counsel who advises the scientists and engineers in his company that they should never read patents is practically incompetent. There is no reason in my judgment why company researchers should have to ignore the patent literature.” former Chief Judge of the United States Court of Appeals for the Federal Circuit, Paul Michel
Performing a patent search initially results in immense amounts of technical and competitive information. One of the challenges associated with implementing a successful patent search program is establishing a repeatable and streamlined process for inter-disciplinary teams to review, categorize, comment on, share, and monitor updates to the information. Ultimately, a well-developed process including a thorough review of the information derived from patent searching by representatives from legal, corporate development, R&D, and marketing, all results in summarized data on which actionable decisions can be made.
Many benefits can be attributed to patent searching. The impact of the benefits differs depending on the size and technology focus of each entity. For example, the benefits of performing patent searches for a start-up with a small number of patents will differ greatly from an established commercial entity with a solid market foundation and larger patent estate.
All of the benefits listed below have some impact regardless of the nature of the entity:
- Expand upon an original innovative concept including adding product features or identifying previously unforeseen markets to sell products and generate additional revenue.
- Reduce research and development time and expense, resulting in faster times to market commercialization, and better return on investment, especially if first to market is a key factor.
- Identify technical areas completely barred from entry, thereby saving significant expenses for unnecessary experimentation and redundant research. This is especially important to perform early in the product development process to determine if any “red flags” are foreseen. These might require “designing- around”, in-licensing, or invalidating the patent, should these patent or literature references be determined to be a barrier to commercialization.
- Identify new manufacturing processes and improve efficiencies of manufacturing operations, saving time and money.
- Discover “white space” that enables expansion of product development and commercialization into new or uncrowded areas.
- Identify “disruptive technologies” that could significantly affect the potential profitability of the commercial enterprise.
- Design “leapfrog” or “disruptive technologies” that will greatly enhance the profitability of the enterprise.
- Identify “crowded areas,” which if pursued may result in expensive litigation with competitors or other third parties.
- Gain insights into future competitor product launches; determining which countries are being considered for manufacturing or marketing products.
- Identify the timing of an invention losing patent protection, making it available for others to make, use, or sell without the threat of infringement.
- Detail which geographies (as well as how many different geographies) competitors are filing in. This provides insight into how relatively important the competitor believes one technology to be with respect to others in its portfolio.
- Gain insight into how quickly or slowly patent examiners are reviewing patents in a technology area; how many office actions are occurring, which patents are being “blocked” by others, and which attorneys are spending more or less time (and money) getting patents granted.
- Understand which entities are working together through partnerships or collaborations.
- Identify inventors that may be potential candidates for employment.
- Determine which companies’ patents are citing others’ patents, offering insight into the interest of other innovators working in the technology area.
- Monetize corporate IP with an understanding of all opportunities and risks in the IP landscape – M&A, Divestitures, licensing, sale/purchase etc.
- Find literature that could prevent competitors from obtaining patents or invalidate existing patents.
- Draft new patents by providing background information, terminology, species and generic taxonomy, and potential breadth and scope of claims, thereby reducing preparation and prosecution costs for those seeking patent protection.
- Enable patent mapping and patent landscape exercises to better understand the direction that individual competitors and/or entire industries are headed. In order to utilize such tools a complete collection of patent references is needed to provide accurate projections.
- Create a searchable database of competitive intelligence including companies, inventors, technologies and other data to gain insight on how new product development ideas fit into the larger competitive landscape.
In summary, the benefits of searching published patent information and scientific literature allows for a better understanding of a corporate enterprise’s innovations in relation to the competitive landscape. This landscape can be viewed as a learning opportunity, mined to:
- Eliminate wasteful redundant research
- Provide manufacturing efficiencies and design of superior products and processes
- Better understand the most cost-effective approach for building and protecting IP
- Reduce the risk of infringing third party patents
- Make better informed, faster build or buy decisions
- Design, develop, and market novel, patented products that truly differentiate in the
Patent searching can appear to create great risks within the corporate environment, or alternatively can result in meaningful benefits.
Typically (and unsurprisingly), legal counsel and IP attorneys believe the risks of patent searching outweigh the benefits, while corporate development, R&D, and marketing personnel push towards exploring publicly available information to make more informed decisions. There are no right or wrong answers and every company faces unique circumstances. However, similar to many other issues that face commercial enterprises, searching for patents is a trade-off between risk and reward — each instance must be weighed accordingly.
Questions, Comments or Feedback? Don’t hesitate to Contact us. We are eager to engage with clients and colleagues.