Patent Filing Strategy – Tips & Tensions

By Chhavi Bhandari


Technological innovation is at an all-time high, with companies constantly competing to create next-generation technology and products. Media coverage of technology and intellectual property issues is ever-prevalent and companies are keen to be seen as innovative leaders in their field.

With such competition, the technology sector has recognised the important role that intellectual property plays within business. However, launching a successful product involves more than merely developing a cutting edge technology, creating an attractive design and implementing an effective marketing strategy: identifying your IP and knowing when, where and how to protect it has become a key component of the overall business plan for successful technology companies.

There are various forms of intellectual property and protection, including: patents, trademarks, designs, copyrights, and trade secrets. Which form of protection is applicable depends on what has been created and how it is intended to be used. For new technology, patents are often the best way to protect the core invention and, as such, companies are eager to file applications; but filing and pursuing patent applications can also be very costly and time consuming.

In order to make important decisions in regards to patent filing, creating a successful strategy is crucial: it involves understanding the company’s overall business goals and aligning them with a number of key financial, organisational, environmental, human and legal factors.

This article will look at these various factors and consider how they influence the development and execution of the patent filing strategy. Looking at the influencers, we will examine the considerations that must be given when developing an effective strategy that best supports an organisation’s present and future business objectives, without adding unnecessary costs.

NB. This article is written primarily with a focus on the commercial and business aspects of filing decisions, as opposed to the legal aspects involved in patent application and prosecution.

Financial & Commercial Tensions

There are many factors that must be considered when creating a patent filing strategy. These factors interact with each other to create tensions and trade-offs in the decision making process. They can be categorised as follows:

Organisational Factors
Type Of Business

Filing decisions may vary considerably based on the size or maturity of the organisation. For example, a start-up or an SME may be more constrained by the financial factors while a larger, more mature blue chip organisation may be predominantly influenced by the external or environmental factors, such as: competition, technology lifecycle etc.

Business Strategy / Policy

Business policy usually influences the filing strategy by defining a broad set of guidelines, formulated after an analysis of all internal and external factors affecting an organisation’s business objectives, operations, and plans. The policy may, at times, even override other factors in the decision-making process: for example, a company’s policy may be to stay clear of aggressive litigation for fear of retaliation; or a company’s strategy may be to file patents in the technology areas or geographies where competitors are or are not filing. Companies may also make filing decisions based on the exploitation strategy for the patented technology or the relationship they have with their suppliers or customers. As seen in recent times, organisations may encourage increased patent filings ahead of an Initial Public Offering (IPO), or other funding event, in order to re-assure investors.

Business Objectives / Goals

Before determining when and where to file a patent, a company should consider the following:

  • How the company intends to use the patent:
  • Whether the patent is relevant to the company’s current or future line of products
  • Whether the portfolio will be used offensively or defensively:
    • Offensively: to assert against others, to licence as revenue generation or to prevent a competitor launching similar products
    • Defensively: for example, to be used to protect the company from competitors asserting their own patents
  • Whether the company has the means to pursue or assert the patent in due course

It is important that all departments understand the potential commercial and business value of any invention whilst keeping in mind the larger goals and objectives of the business.

Need For Funding

The value of patents is increasingly being recognised by the financial community. Patents owned by start-ups are becoming an important part of the selection criteria for venture capitalists, and portfolios have been shown to positively affect a start-up’s ability to attract investment. Most recently, companies are using their patent portfolios as part of the safeguard against which debt financing can be secured. Having a significant patent portfolio can also contribute positively to a company’s reputation in the market, where sometimes the size of a patent portfolio may be seen as a measure of innovation. A company that foresees the need for future funding may choose to place emphasis on their patent filing strategy. The value of a portfolio is also likely to be under considerable scrutiny in an exit event, such as a merger or acquisition.

IP Education

Education is important across multiple departments to ensure understanding and cooperation, in regards to seeking patent protection. As well as a basic knowledge, employees should be familiar with the portfolio and be educated about identification of patentable inventions and how to manage situations that are specifically related to the company’s intellectual property, such as:

  • The creation of a new product
  • The suggestion of an improvement to a product by a customer
  • Collaborating with partners to develop products
  • Alleged infringement of the company’s products by a third party.

If employees are not appropriately educated, patent rights may be lost and costly mistakes could be made. For example, failure of employees to understand that a new improvement to a product could be patentable can result in the loss of foreign and domestic patent rights. Filing a patent application after a public disclosure (e.g. offer for sale, seminar, digital publication) has been made, will result in the loss of most foreign patent rights.

Invention Management Programme

It is essential that employees know what to do when they invent something, or simply to recognise that they have done so and are not underestimating the invention’s potential. A sound IP management programme should mentor employees throughout the process of invention capture by encouraging them to disclose their ideas, providing a simple process on how and where to submit new concepts and assist in conducting prior art searches and the like. An IP management programme will enable the organisation to successfully capture all new intellectual property, thus protecting their investment in innovation. Further, the programme should enable an effective filing process for an organisation. It is never a ‘one size fits all’ approach and rarely is it appropriate to simply patent everything, everywhere, immediately. A ‘tiered’ approach can help organisations in building a cost-effective strategy. Inventions may be prioritised in order of importance to the business and a different filing plan may be devised for different tiers, for example: the top tiered inventions may be fast tracked through prosecution in key jurisdictions, to achieve maximum protection at the earliest time; whilst the strategic decisions for the medium or low tiered inventions may be delayed (by making deliberate strategic choices in the patent filing process), to provide more time to further assess their commercial value or simply to delay cost.

Scope: Employee Objectives

Employment contracts, scope of work and the roles and responsibilities of employees may play an important part in both the quantity and quality of inventions disclosed and, indirectly, could affect the creation of a filing strategy. This is because capturing innovation can be time consuming and needs to be part of an employee’s objectives for active participation. An example of this is 3M’s well-documented “15 percent time”: a program at 3M that allows employees to use a portion of their paid time to develop their own ideas. 3M boasts over 30,000 patents, many derived from its “15 percent” program. Similarly, Google’s “20 percent time” famously gave birth to Gmail, Google Earth, and Gmail Labs.


A company considering patenting its inventions may quickly find that the geographic scope of the market is quite wide. For some industries, such as the software sector, the marketplace reaches globally with significant development resources, know-how and competition coming from not just the traditional markets (e.g. US, Europe, Japan), but also increasingly from fast-developing countries like India and China. As technological developments take place in new global regions, there is much to consider from an intellectual property perspective: generally, companies file in regions that hold the majority of market value for a product, but it is also important to consider manufacturing location, imports, exports routes etc. Competitors’ locations, their markets and the likelihood of those competitors having significant patent portfolios must also be considered in developing the patent filing strategy (see Environmental Factors).

Organisational Structure: Coordination between Different Teams

The organisational structure outlines how different employees interact with each other as part of their work. The alignment of objectives between directly related or unrelated employees could be particularly useful in enabling better invention disclosures. For example, a platform where the Sales & Marketing team could regularly interact with the R&D department to share what they have learnt about the customers’ needs can be translated into patentable inventions with the help of the Legal team.

There may also sometimes be different priorities between the R&D department and Legal departments, with the Legal department keen to capture and protect innovations from an early stage and the R&D team reluctant to file an application before full development has occurred. Similar issues can arise between all departments and Finance, who are keen on keeping costs to a minimum. Good coordination between different departments working together to an agreed plan and budget is essential for a successful filing strategy.

Environmental Factors
Competition: Understanding the Patent Landscape

In defining an organisation’s patent filing strategy, it is necessary to consider the overall technology and patent landscape to understand the various opportunities and competitive threats. A patent landscape can provide an overview of a specific technology area, as determined by patent ownership and patent coverage or scope, in the context of the current activity of market players and products. This can assist companies in determining technology growth and gaps within a particular industry where further research and development could achieve a competitive edge, as well as to carry out incremental innovation for new product development. Consequently, organisations can use this information to identify potential IP threats and opportunities and to formulate filing strategies early in the innovation cycle. Understanding the patent landscape is not the same as identifying prior art, patentability or a freedom-to-use search, but can provide a commercial perspective on the significance of an invention. For example, if an entire industry is moving in a particular direction, with large numbers of patents being filed in a new area, it may make sense to patent even incremental improvements in this area, as a future cross-licensing scenario may develop. Alternatively, a ground-breaking patent in an area where there is little patent activity and the market is nascent could turn out to be a valuable investment (although perhaps speculative and with added risks).

Sometimes patent filing and transactions may simply be about strengthening a company’s competitive position: the value of patents as a defensive tool is uncontested, particularly in today’s highly competitive market place. Filing directly against competitors’ products and steering claims through patent prosecution can sometimes be more useful than just covering your own. However, in some technology areas, patents may even be a ‘must have’ for new entrants. Whether a company is trying to block a competitor’s product development plan, gain entry into a new market, or seek investment, patents can provide a significant competitive advantage.


Standards are vital for the wide adoption of new technologies in the market and to ensure a smooth interoperability of complex electronic devices. Most Standardisation bodies have established their own patent policy. Patents that are developed within a Standardisation framework may be required to be made available to the Standardisation body in order to include the relevant information into the Standard-setting process. Patent owners may also be required to agree on specific licensing conditions, such as: the license must be granted under fair, reasonable and non-discriminatory terms (FRAND license); or that the license must be royalty free (RF). Even though patents may be subject to FRAND and the licensor may be constrained on the license terms, these could play an important role in cross-licensing negotiations or patent pooling, if they turn out to be essential to the Standard. A first step will be to ensure any such encumbrances are noted and to determine a filing strategy for these types of patents; recognising the constraints and opportunities associated with Standards patents.

Technology Lifecycle

It is necessary for companies to estimate the future development of a technology area and make decisions whether to invest in it or not. Most technologies typically follow a well-established lifecycle of research & development, ascent, maturity and finally decline. An understanding of the current phase of the technology being considered could affect filing decisions. There is a need to have checkpoints in the development process to ensure that protection of any intellectual property is considered at the right points, and is re-assessed as the technology and product is developed.

Risk Assessment

An IP risk assessment is essential to manage potential problems before they arise. Pre-planning can lower the risk of issues arising during acquisitions and allows management to price products in a way that incorporates the risk that is assumed. In today’s competitive environment, anyone who sells a product may risk infringing the patent portfolio of a practicing or non-practicing entity, so due diligence is essential where potential issues are foreseen. Conversely, if a company has a patented product, they also face the risk of steep litigation costs in enforcing patent rights if the chances of litigation have not already been pre-determined.

Risk assessment may also include being aware of the litigation climate, monitoring NPE activity, knowing competitor’s patent positions and considering freedom-to-operate or in-use analysis of their own products. The growing size of a business also increases its risk of litigation but it is harder for a company to protect themselves retrospectively, so preparation is key. Other risks to consider in conducting an assessment can also include those affecting finances, operations or even reputation.

In-Use Analysis

It may be useful for companies to monitor patents in their portfolio for potential use/infringement on an ongoing basis. This could inform prosecution strategy of existing applications, for example.

Some companies monitor competitor’s filings and consider filing improvement patents to block them. By creating a ‘picket fence’, the company could surround the pioneering patent of the competitor with many patents on the incremental innovations necessary to take the original idea to market. This would interfere with the competitor’s ability to make and sell products customers really want, without licensing the surrounding patents. The antithesis is to ensure that competitors are not creating a picket fence around a company’s core innovation. But sometimes, spending exorbitant fees for protecting incremental patents may not be financially practical or even necessary. Defensive publication (i.e disclosure) of these innovations would effectively increase the scope of the original patent by disallowing these incremental patents. Since the original patent is fundamental to the incremental improvement, it can extend its protection over the new ideas.


As each company in the supply chain seeks to manage its relationships with each of its customers and suppliers, there exists potential for interesting dynamics, from an IP perspective. Customer–supplier relationships often lead to developments that are not clearly attributable to either party alone. This lack of clear ownership can result in scientists and engineers at both the supplier’s and the customer’s companies feeling that their own company’s contribution was more substantial than the others.

Most product manufacturing companies rely on their suppliers to provide them with raw materials. What may be a relatively mundane raw material for the customer, however, may be one of the supplier’s strategic products, and the supplier may decide to apply for a patent on the invention. This tactic may allow the supplier to lock the customer into single-supplier arrangements at unfavourable prices. But, there are two sides to every power struggle. Even if a supplier may control some aspect of an invention, such as the ‘composition of matter’ for a key raw material, the customers may be able to patent uses of the raw material in their own products and limit the ability of a supplier to sell its product to other customers. When the other customers are forced to use a different raw material in their products, the supplier’s market will be diminished.

The location of a company’s suppliers and customers can also influence the patent filing strategy, especially in terms of the geographies to consider. Getting some of these principals right, up front, is essential to avoid cases where patents filed by a company have ambiguous ownership and license rights downstream.

Financial / Commercial Factors
IP Budget: Investment vs. Benefit Analysis

Patent prosecution and maintenance can be an expensive process, especially for companies with an international portfolio. The recent recession and ensuing tough economic climate have significantly affected corporate patent budgets. However, the decline has also motivated companies to monetize their patent portfolios via patent litigation, licensing or sales, in order to create additional revenues and offset IP expenditure. Due to increased patent litigation and portfolio transaction activity in recent years, there is greater recognition of patents as valuable assets (defensive and offensive) and their influence on a company’s value. With the need to maintain competitiveness in a highly dynamic market place, there is pressure on many technology companies to adopt an aggressive patent filing strategy by filing numerous applications in succession.

Often, long term patent filing costs are not properly understood. Not only are the costs highly variable between jurisdictions but they are also subject to year-on-year increases. Predictions surrounding future IP expenditure can play an important role in better understanding the longer term investment profile. In today’s market, although no company can afford an unlimited IP budget, external factors require them to invest in innovations that have the potential to add tangible value to the business. Weighing up systematic costs against quantified potential benefits is essential to ensure that expenses will be justified and necessary investment maintained in the long run.

Tax Incentives

Intellectual property is highly mobile and can be relocated to reap the benefit of jurisdictions offering lower corporate tax rates. Some countries have adopted various tax regimes that seek to reduce the rate of corporate tax applied to income resulting from qualifying IP.

Examples include:

  • The Netherlands: application of a reduced rate of 5% to IP derived income
  • Belgium and Luxembourg: exemption of 80% of patent income from corporate tax payments.
  • UK: Patent Box scheme – over the next 5 years the scheme will gradually reduce the rate of corporation tax to 10% when applied to the income derived from patents.

A common reason for filing patents is to deter competitors from launching competing products, thus providing a monopoly for the patentee. Sometimes patents may be unlikely to serve such a purpose because competitors could easily work around a patent and the cost of enforcing would be too high, but it is not always possible to tell what competitors are doing, or if other barriers to market-entry exist. In these instances, the ability to benefit from the reduced tax rate provides a further reason to file patents and may tip the balance in favour of filing a patent application where it would not previously have been justified. Many companies reassess their patent filing strategy in view of these tax-saving regimes. For example:

  • Companies that have not previously filed patent applications may do so
  • Companies may decide to patent individual components/incremental inventions so that the whole product qualifies for the tax savings
  • Companies may develop a new filing strategy for their products with fewer patents

London-based folding bike manufacturer Brompton Bicycle has a £17 million turnover ( and is expected to save £132,000 as a result of the recently introduced Patent Box scheme in the UK. This will in turn enable them to invest more in innovation and filing patents.

Financial Risks

From the traditional risk management perspective, intellectual property risk can be categorised as ownership risk and infringement risk.

From the intellectual property ownership perspective, some of the commercial risks include:

  • The legal costs of protecting and enforcing intellectual property rights
  • The loss or diminished value of intellectual property as an asset; or diminished licensing or product revenues, as a result of legal findings of invalidity, unenforceability, or non-infringement; or challenges to title or ownership
  • Poor financial management procedures around intangible asset identification, valuation, control and commercial exploitation

From the third party intellectual property infringement liability perspective, the risks include:

  • The legal costs to defend against an intellectual property infringement or theft suit
  • Any resulting settlement or damages costs
  • Design-around costs; harm to customer relationships; and negative impact on company share price

A disciplined use of risk assessment practices and subsequent action will minimise the impact. This requires a co-ordinated approach by Risk Management, Legal, Finance, Product Development, and Marketing to identify, analyse and manage the risks. IP Insurance may also be considered as part of the risk mitigation plan.

IP Revenues

Knowing what IP to protect and what can be used to generate additional revenue is important in deriving value, and an essential component of the overall filing strategy. Some interesting examples of companies successfully monetizing patents (and, at times, even using the incremental revenues to fund filing of more patents) are:

  • Texas Instruments: believed to be the first company to monetize its portfolio of patents (more than 38,000 in the 1990s) when the company was losing market share to competitors.
  • IBM: another company who used the same technique in the 1990s to license its patents to make more than $1 billion annually in royalty revenue.
  • Philips Electronics: enhanced licensing revenue by 45% and obtained 35% more patents in 2000 as compared to their performance in 1999. The company would have lost money on its consumer electronics business in 2005 if not for 478 million in licensing income.
  • Ericsson: owns 27,000 patents covering everything from wireless access, WLAN, as well as the whole ICT value chain. The net revenue generated by the company’s IP reached SEK12.8B (£1.2B) in 2013. Ericsson currently has more than 90 license agreements in place.
  • Microsoft: the company makes a whopping $2 billion a year in revenue annually simply from collecting patent royalties from Android vendors.
Human Factors
Employee Participation & Encouragement

Generally, a company needs mechanisms to encourage more of their employees/engineers to submit ideas and participate in the IP creation process, which in turn allows the IP department to be more selective in which disclosures proceed through to application. This improves overall quality/value for money of the company’s patent portfolio. Companies recognise inventors through reward schemes such as plaques, publicity and financial incentives; all of which help to encourage invention submissions and idea development.

Such incentive schemes may also serve towards improving employee motivation and retention. Employees, by virtue of their roles as inventors, may find employment more satisfying through having their status within the company enhanced, and would perceive their association with the firm as one with long term value creation, should they be able to protect their innovations. However, this can also drive negative behaviour in encouraging the desire to file high numbers of patents, irrespective of their quality, relevance or value to the company.

Skills & Experience Of Employees

The skills and IP experience of a company’s employees can greatly influence the number, quality, relevance and value of invention disclosures, which in turn could affect the business’ patent filing decisions. It should be recognised that not all employees necessarily have the time, skills or inclination to capture inventions. In building a filing strategy, it is important to identify the likely participants in the process and their base level of experience, and be willing to provide any additional support that may be required, for example: assisting in the capture and documentation of new ideas. Without understanding this, a company could fail in execution later on, or have a filing strategy with unachievable targets.

Board/Management Expertise & Attitude

More often than not, innovation in any company is management-driven. IP strategy needs representation or at least support at board level and all tiers of management need to recognise its importance and have appropriate IP objectives. A management team that recognises the significance of IP will not only encourage innovation, by allowing employees to spend time developing their ideas, but also invest in the IP education of their employees. Such management would ensure annual allocation of budget towards IP activities and that IP goals feature in their employee’s objectives. In a number of medium and large sized companies, responsibility for IP matters rests with the Chief IP Counsel, the Director of IP or Vice President of IP.

In many other companies, especially in Start-ups and SMEs, responsibility for IP matters is not so clear; often falling on the shoulders of the Chief Technical Officer or General Counsel. However, in recent times, the role of Chief IP Officer (CIPO) has emerged in many companies, operating at the intersection of IP, Technology, Business and Legal. Commercial focus is key to the CIPO role, given the need to understand where IP fits into the business and the overall commercial context.

Patent Attorneys & External Advisors

A company’s filing strategy may be influenced by external advisors such as: patent attorneys, who are mandatory to the process; consultants, educators, IP lawyers etc., who may be assisting with creation and execution of the overall IP strategy, inclusive of the patent filing strategy.

A patent attorney typically advises the firm on patentability, prosecution strategy, freedom to operate/infringement issues, due diligence, litigation etc., but can also be instrumental in implementing the best protection for a company’s inventions, through the filing of divisional patent applications and continuations.

The extent of an outside counsel’s involvement in developing a strategy may vary greatly depending on a company’s overall size, maturity and/or in-house expertise. External support may be essential for smaller companies who do not have the specialist skills in-house, but could also benefit larger companies by providing them with independent views and additional complementary resources.

Legal Factors
Policy, Compliance & Legislation: Jurisdiction, Enforceability & Effectiveness

The decision of the countries in which to seek protection must take into account the ability and willingness of the organisation to enforce the patent rights in each jurisdiction. Although patents can still act as a suitable deterrent without proactive assertion, a company should only file patents that they are prepared to protect and, in some instances, to defend. Maintaining patents across multiple jurisdictions is costly and time consuming; an organisation should only seek patent protection in countries that materially matter to their business or competitors’ businesses, whilst being aware of the policy of each jurisdiction, in regards to enforcement. The judgements of the courts in each jurisdiction should also be considered, should the company end up becoming embroiled in patent litigation. For example, filing a patent in the US has a relatively modest cost but accounts for approximately one third of the world-wide revenue of any product/service, whilst also offering active patent courts that provide a real deterrent – at a cost.

Litigation & Infringement Activity In The Technology Area/Geography

The litigation environment should be considered in any filing strategy. In the Smartphone sector litigation is rife and participants in this market have had to materially step up their filing rates and, in some cases, acquire assets to strengthen their position (e.g. Google/Motorola Mobility). One notable example is Samsung who moved into the consumer electronics and Smartphone market significantly in the last decade; their recognition of the importance of IP has led to prolific filing. In a paper published by Harvard Business School in August 2013 it was said of the smartphone wars that, “the patent war (that) intended to hamper the growth of the Android platform may have merely shifted the sales to weak IP countries.” Looking at the market, and predicting competitor’s moves, is necessary to help steer a company into the strongest IP position for defence.


The diversity and complexity of the various factors makes it essential for the patent filing strategy to be subordinate to the overall IP strategy, which in turn should be subordinate, but well aligned to, the larger business’ corporate strategy. There are a number of factors to consider when developing and executing a filing strategy and the majority of outcomes will be dependent upon the individual company’s requirements and priorities. IP strategies also evolve over time, due to both internal and external factors. Having an agreed strategy helps to manage expenses by clearly defining which key inventions should receive the most effort and attention to avoid potentially unnecessary costs associated with filing patents of lesser importance to the company.

Key takeaways:

  • It is essential that a company aligns its patent filing strategy with its business strategy and objectives.
  • Companies must keep themselves abreast of their technology environment, especially the competitive landscape. It it is important to continuously identify, assess and minimize the IP threats and risks.
  • A company should never lose sight of the financial aspects of a filing strategy. Given the ever- increasing cost of patent protection, attention to value and efficiency can help the company craft a patent portfolio that best supports their business objectives without making patent protection an unjustifiable cost centre.
  • The value of a company lies in their people: people include employees, management and external advisors. Investing in the selection and training of key internal and external skills is essential to the execution of a successful patent filing program.

‘How 3M Gave Everyone Days Off & Created an Innovation Dynamo’, Kaomi Goetz, 2011 (

‘The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Market’ , Harvard Business School, 2013 (

‘The role of Chief Intellectual Property Officer’, INTIPSA (

‘Securitization of IP’ , WIPO SMEs, Dr Prabuddha Ganguli ( www%2Fmeetings%2Fen%2F2005%2Fsmes_qtc%2Fpresentations%2F wipo_smes_qtc_05_ganguli_8.ppt&ei=nwQrU_K9LYWBhAfap4DoCQ&usg=AFQjCNH5ti-FZECOzVt8K6SqRJULocnflw&bvm=bv.62922401,d.d2k)

‘Ericsson Seeks to Boost Patent Revenues’, Total Telecom, Nick Wood

‘Living in the Networked Society’, Ericsson’s Annual Report 2013

‘Android is Generating $2billion a year…fro Microsoft’, BGR, Brad Reed

[This post originally appeared at ClearView IP.]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: