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Expert outlines “what it takes” to turn intellectual property infringement into an ancillary income stream
By Merilee Kern, MBA
Last year the United States Patent and Trademark Office (USPTO) published a report citing a “drastic rise in patent litigation” that also referenced a USPTO working paper ominously revealing that “economists, legal scholars and policy makers are concerned about the impact of patent litigation on the rate and direction of U.S. innovation and on the functioning of the U.S. intellectual property system.”
These and other factoids make clear that patent and trademark infringement is alive and well in the United States, most often to the financial dismay of intellectual property-holders who spend untold hours and egregious sums of money trying to protect their assets—and the marketplace edge related thereto.
However, what if rather than issuing the knee-jerk Cease and Desist and pursuing exhaustive and expensive litigation route to prosecute unresponsive offenders, patent and trademark owners instead strategically engaged said offenders in ways that actually boost their own bottom lines, accelerates growth, raises capital, and expands market share? While this might sound like a far-fetched notion, it’s exactly what Tim Murphy, Chief Executive Officer of Rebounderz Family Entertainment Centers is doing…and with tremendous success.
Having frequently found himself in situations where competitive businesses were using industry-leading materials and methodologies for which he and his company held patents, Murphy took a surprising, gutsy and rather ingenious approach. Rather than litigating with the sole intention of shutting down the offenders or certainly their use of his IP at the very least, Murphy instead adopted a strategic partnership mentality, enforcing his patent rights in a way that’s earning his company significant ancillary revenue streams and hastening corporate growth.
Below are a few of Murphy’s suggestions on “what it takes” to turn a patent and trademark infringement situation into profits:
Partner in a Joint Venture
Create new opportunities together in a joint venture or strategic partnership. New services, additional product lines and spinoff businesses can be created to benefit both parties. Just because an entity has infringed on a patent or trademark does not mean that they want to or intend to continue infringing in the future or that they are unscrupulous. Clearly layout a plan that is ‘win-win’ for both parties and work together to build both bottom lines.
Strategize how you and the infringing party can work together as strategic partners ongoing, for the long-term, in order to sustain value. Explore if the relationship can evolve to possibly work together to sell additional products or services that you were previously not exploring or that didn’t make sense in the short-term? There are several ways the relationships can be extrapolated for mutual gain. It’s just a matter of aptly conveying the value your organization brings to the table, not the least of which is the patent or trademark license or usage opportunity for the party that would otherwise have neither.
Offer a licensing and/or royalty fee for continued use.
While you should certainly have a Cease and Desist letter at-the-ready, the other party may actually be unaware of their patent or trademark infringement to begin with. Most good business people want to do the right thing and don’t intentionally violate IP. So develop a program offering a usage license or royalty fee for the life of the patent or trademark either payable in a lump sum, as annual payments or as monthly payments to make it easier for the infringing party to budget for. Your IP attorney or your company’s corporate counsel can readily help create this license agreement to help protect your company as well as the ownership integrity of the patent or trademark itself.
Give Offenders a Choice: Work together to monetize or face legal action.
Try to give your patent or trademark offenders options that make it easy and attractive for them to work in sync with you. It’s not hard to open your net wider to provide new and creative solutions, and opportunities abound. These include
1) providing a license for the length of the patent or trademark;
2) selling a license for a shorter period;
3) providing an outlet for them to sell you their business if that is their intention, or if there is little opportunity to collect a license fee;
4) suggesting operating as a joint venture or partnership such that your patent or trademark license serves as your investment into the new entity;
5) creating new products with the infusion of the patent or trademark that each party could bear responsibility for selling;
6) developing a scenario that whereby both parties could come together to sell both companies to a larger entity, such as a private equity firm that may purchase both businesses.
Get a sense of intent and beware the “pending” game.
Some infringing businesses and manufacturers will claim to have patents or trademarks pending, however all too often these companies only have patent(s) and/or trademark(s) “pending” that are actually infringing on perfected patent or trademark claims of another party. So be sure semantics isn’t getting in the way of everyone’s clear understanding of the legal situation and real ramifications.
Vehemently protect your well-earned IP Holder rights.
You achieved patent or trademark protection for a reason, and by all means file everything necessary to keep the patent or trademark valid and unencumbered. Let the industry know your intentions so there is no misconception of who owns the patent or trademark, who has the protected claims, and the rigorous legal action that will be taken against anyone violating your patent or trademark’s protected claims. Take an offensive strategy by ensuring patent or trademark infringers know with specificity how your claim(s) are far superior than their designs.
To accomplish these objectives, have your attorney write letters to the patent or trademark infringers as soon as possible, outlining exactly how, when, where and why they have misused your patent(s) or trademark(s) without a proper license. Continue aggressive follow-up and take pictures and collect other evidence, as appropriate, of how the infringers have illegally utilized used your perfect patent or trademark. Ultimately, have some bite in you! Always be willing to act and pursue legal action if need be. But, do certainly make every attempt to monetize before going this route as one company’s mistake could very well be your good fortune.
“While we’ve found it highly prudent to work with infringing organization as strategic partners and settle patent or trademark disputes through lump sum or monthly payments in order to reduce ongoing legal costs for both parties, there are some instances where it’s necessary to use legal means to make patent or trademark infringements work in your favor. In my own experience, my company has settled suits by having the infringing party purchase our patent license, allowing them to continue to operate their business using our three (3) perfected patents that cover 59 claims.”
About the Author: Branding, business and entrepreneurship success pundit, Merilee Kern, MBA, is an influential media voice and lauded communications strategist. As the Executive Editor and Producer of “The Luxe List International News Syndicate,” she’s a revered consumer product trends expert and travel industry voice of authority who spotlights noteworthy marketplace change makers, movers and shakers. Merilee may be reached online at www.TheLuxeList.com. Follow her on Twitter and Facebook.How to to Turn Intellectual Property Infringement into Profits @LuxeListEditorClick To Tweet