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20 Feb 2003
How did the boom and bust of the telecoms sector affect intellectual property in optics? Oliver Graydon speaks to a patent attorney at Photonics West to gather some answers.
From Opto & Laser Europe March 2003
When it comes to intellectual property (IP), the photonics field is getting crowded. More than 53,000 granted US patents mention the word "laser" on their front page, and the number of new patent filings on optical technology is steadily rising each year.In such an environment, it is becoming increasingly tough for photonics firms to avoid infringing on a competitor's IP. Joe Gortych, a patent attorney specializing in optics, offers Opto & Laser Europe some useful advice and observations about managing optical IP.
What was the effect of the telecoms boom on optics patent applications?
There was a dramatic ramp up in the number of patent applications. Because of the boom, more and more companies got involved in telecoms, so the market became more crowded. Also, there was a sense that money was no object, so patenting budgets were big.
To give you an idea of numbers, I went on the Internet the other day and did a search of US patents and patent publications under the terms "optical fibre" and "Bragg grating". It came up with 1800 hits. So, in effect, there are around 1800 possible pieces of intellectual property in the US that you would have to scrutinize if you had an invention that used an optical fibre and a Bragg grating. That gives you an idea of the density of the intellectual property in the field. Given that kind of thicket one has to tread very carefully. You have to be very attentive that you're not stepping on someone else's IP and that you're policing your own.
What mistakes were made by companies during the rise and fall of the telecoms market?
During the boom there was a lot of venture money and lots of companies were founded. A common mistake was that companies would launch a product and only later on check for IP clearance. Larger, well-managed companies watch for this and pick off the start-ups that are not correctly positioned with their IP. The companies that already had their IP in place were often better positioned to stave off the competition and maintain market share because newcomers can find it hard to avoid the patent thickets of the big telecoms companies.
When markets get tough, firms look for places to increase their revenue and pay more attention to their competition and IP. Companies like Corning, for example, that have built up a very big patent portfolio on optical fibre are not going to let someone else get away without a licence given their current financial situation. There is a good deal of pressure to leverage IP to the maximum extent possible, particularly in an economic downturn, to generate revenue.
Do companies have a good awareness of the value and importance of IP?
The simple answer is that the sophisticated ones do and the unsophisticated ones don't.
Every company has an IP strategy, whether they know it or not. It's just a matter of how sophisticated it is. The former tend to have a well-managed long-term IP strategy while the latter tend to have an ad hoc reactive approach that deals with things as they come up. The preferred way is to have an IP strategy that is aligned with the company's business plan and is constantly updated and reviewed.
To run a successful company you need to pay attention to the technology, the business and the legal aspects. It's the combination that is important. Many firms are imbalanced in this regard, with poor communication and cohesion between their legal, technical and business people.
A well-managed large portfolio of patents can ultimately become a very useful revenue stream. For example, it is estimated that IBM makes upwards of $1 bn each year through its licences. During mergers and acquisitions, IP plays a very important role when looking at a company and deciding what it's worth. For companies that have recently exited the photonics industry, such as ADC and Agere which have sold their optoelectronic operations, IP was no doubt a significant part of the deal.
What are the consequences of there being so many patents in photonics?
The consequences for companies wanting to enter the market is that if they don't have their own IP they will likely have to buy it. That cost will ultimately be added to the cost of their products.
If you're a start-up then it's well worth considering teaming up with a large company in the market in order to gain access to their IP, or to get help in developing your own IP. Often this can be arranged through giving them some equity in your company or preferential access to your IP under favourable terms.
Also, telecoms companies are now increasingly exploring other technologies as they scramble to find sources of revenue. One method of doing this in a strategic way is through "IP mapping". This involves analysing prior art in a technology to identify IP opportunities. Lastly, companies that have been in the market for a while and wish to remain competitive have to work hard to stay on top of the technology by continually innovating and filing to obtain new patents.
What are the most common misconceptions you encounter?
High-tech companies sometimes have unreasonable expectations of what patents and intellectual property can do for them. They sometimes confuse a patent with a licence to coin money. The fact of the matter is that getting a patent is just the beginning. Patents need maintenance and looking after and what many small companies are missing is an intellectual property management system.
Companies often don't appreciate the time, effort and expense involved in producing and maintaining a patent portfolio that has real business value. A lot of people also underestimate the cost involved, especially when it comes to foreign patent protection. This involves all kinds of translation fees, maintenance and issues fees that - to the surprise of the uninitiated - create a never-ending stream of invoices that can add up fast.
How can companies cope with the fast-moving nature of technology?
Very short-lived technology might not need to be patented. It takes a certain amount of time to get through the patent office and if that time is longer than the expected lifetime of the technology then you should think carefully before trying to patent it. If, on the other hand, it turns out not to be a fast-moving technology after all, you run the risk that someone else might go and patent it. It's worth noting that there are an amazing number of very similar inventions in the photonics field.
People may also choose not to patent and keep things secret, for example their manufacturing process. Making decisions about what should or should not be patented needs to be looked at from a variety of angles including the legal, business and technical aspects.
A lot of photonics companies will file applications on a technology and then, because the technology is moving so fast, they will keep trying to capture the improvements through vehicles called continuations of the original application. In effect, they are trying to stretch their IP on a case by case basis and that can sometimes be a dangerous practice.
For more information US Patent Office
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