How to use patents as a barrier to entry
“In business, I look for economic castles protected by unbreachable ‘moats.’” — Warren Buffet
The United States Patent and Trademark Office was established to protect inventors and give them the freedom to operate without influence from larger corporations. This freedom to operate enables businesses to operate in a truly competitive environment, but it does very little to actually protect them from competitors. A typical patent is a way to guarantee that no one will be able to copy the specific technology claimed in it for a limited time, but that’s about all it guarantees. There is no legal business monopoly. So, how can we protect the business value?
Any problem that is worth solving, and any business opportunity worth pursuing, has plenty of viable competing solutions. Protecting just one solution is virtually worthless.
The trick is to figure out which patent portfolio is going to become a barrier-to-entry to all possible solutions in the space. The first step to accomplish this is to focus and clarify the value proposition. Let’s use an example to help visualize this: Dyson created a technology that solved many mechanical challenges in vacuum cleaners. Those mechanical issues had a direct impact on the value that consumers associated with vacuum cleaners, which was to maintain high suction over years of service. By solving the problem, Dyson delivered a clear value proposition. Dyson created a patent portfolio protecting the key elements of their solution and then promoted their vacuum as a patented technology. Another well-known example is Apple’s iPhone. The iPhone was not the first to market, but it was the first to provide a user interface that anyone can use with ease. Apple patented this interface before the phone was marketed, therefore protecting its value proposition.
In principle, value proposition is directly correlated to market share. In turn, protecting the value proposition is a way of protecting the market share.
Now, let’s return to patents: The atypical patent is tantamount to having a lock on the front door of your castle when there are still access points through side doors or backdoors. The right patent, or in many cases patent portfolios, can serve more as a moat, making it very difficult for an intruder to get outside of your castle, let alone enter it. It forces them to overcome hurdles to even enter your space. While having that moat doesn’t necessarily stop competitors from trying to enter your space, it gives you the benefit of time and distance to see them coming and to do something to protect yourself.
Dyson and Apple thought differently in how they approach patents. They started with the value proposition and then asked themselves, “How can I protect it?”. Apple generated a small patent portfolio (less than 10 patents) to protect the user interface. Dyson identified the key elements of their cyclon technology and protected it. Both companies demonstrate a healthy bottom line as result.
Any tech company can churn out endless IP to protect their inventions. But when a company focuses on protecting the value proposition of their business, it truly changes the game. So, here the questions that need to answer:
- What is your value proposition?
- Can this value proposition be protected with patents?
- What is the IP portfolio strategy that will protect your value proposition?
- How does your existing patent portfolio protect this value proposition?
It might be a good time to evaluate just how well protected your business is, and whether you need to change your game when it comes to your intellectual property.