Stay Ahead of the Competition

By Lily Li

Every diligent MBA student learns about Porter’s 5-forces analysis (pictured above) in one form or another. In effect, the competitiveness and ultimate value of any company or product depends on its relative market position to competitors, new entrants, substitute products, consumers, and suppliers. An effective patent strategy can improve your market position by deterring new entrants, removing substitute products, and keeping you innovative and mindful of other competitors.

Barriers to Entry: The patent is the epitome of a successful barrier to entry. The holder of a patent has the legal right to monopolize an invention and exclude new entrants from the marketplace. By developing or buying strategic patents around your key products and processes, you effectively create an impenetrable “picket fence” around your products. You force your competitors to use more expensive technology to work-around your patents – increasing the price of their products and decreasing their competitiveness.

The Amazon 1-click patent is a perfect example of a barrier to entry. Amazon can provide a simple 1-click shopping experience for consumers and exclude other leading retail e-commerce businesses from doing the same. Barnes and Nobles, eBay, and other leading retailers must rely upon cumbersome shopping carts. Amazon has successfully licensed its 1-Click patent to Apple and has sued its major rival, Barnes and Nobles, for infringement.

Remove Substitute Products: Your company can use patents offensively to remove substitute products from the market. Aggressively file patents on any of your technology that is related to your competitor’s technology. This will create an offensive “patent thicket” around your competitor’s patents, so that they cannot claim an entire technology space for themselves. If your company does not own strategic patents, conduct a patent search and acquire patent portfolios (or entire companies) that have the patents to protect your products.

Google’s recent $12.5 billion acquisition of Motorola Mobility Holdings was for one main purpose: Patents. Through the acquisition, Google gained access to 25,000 strategic mobile patents. These fundamental technology patents strengthened Google’s patent portfolio, allowing the company to protect the Android market from substitute products and to provide a defense mechanism against patent infringement suits by Microsoft, Apple, and other competitors.

Stay Innovative & Mindful: Patent searches and analytics keeps you up to date on competitor technology. After all, patent data is public information on your competitor’s key products – a treasure trove of business intelligence that your competition will not disclose elsewhere. Patent landscape searches can tell you where to direct your R&D strategies, whether to follow new innovative technology trends or to seek out white spaces to develop a niche product.

Forbes magazine lists the most innovative growth companies, by comparing their market capitalization to their estimated NPV: http://www.forbes.com/special-features/innovative-companies-list.html Intuitive Surgical, the third most innovative growth company on Forbes’ list, proudly cites on its website that it holds “exclusive field-of-use license for more than 870 U.S. and foreign patents as well as more than 990 pending U.S. and foreign patent applications.” Not surprisingly, Amazon and Google, with their strong patent portfolios, come second and third on Forbes’ list.

[This article originally appeared in CleanTech PatentEdge]