IP protection might just save the tech companies from their crisis
In a climate where companies are cutting costs, one thing is worth holding on to: your patents.
Intellectual Property (IP) is not the sexiest saying heard in the hallways of Startup Nation. Patents act as a way to help prevent others from using the invention of a company or individual - and while securing them can make or break a business, entrepreneurs hardly ever speak on the necessity of such items.
A company that builds a strong portfolio of patents from its very first days in operation can help secure its growth and future by acting as a defense against competitors who might be working on the same product or service. The help of law firms can ensure that these inventions - usually in the form of AI algorithms or software - can be safely discussed and shared for years to come.
“We understand patent law…it is quite complicated and requires a lot of professional understanding,” explained Ehud Hausman, who manages the Hi-Tech practice of Reinhold Cohn Group. “We are able to help our clients to build IP strategies that will serve their business needs. We will have a communication and discussion with the C-Level executives to understand what the company's doing, what their business goals are, the R&D stage, and together with them we communicate and listen to what they want.”
Reinhold Cohn Group was established in 1934 and is the largest IP firm in Israel. With more than 200 employees (70 of which are patent attorneys), the firm helps foreign clients file patent applications in Israel, and also represents early-stage pre-Seed “sweat and blood entrepreneurs” who are starting their companies and wish to protect their inventions. It focuses on patents, trademarks, copyrights, and due diligence across a variety of industries such as blockchain, foodtech, AI, and renewable energy.
Hausman argues that filing protections against your inventions are a significant part of the success of the company. The concept is to secure what is yours against those who might seek to steal or mimic your work: “To minimize the risk of competition penetrating your territory,” he says. “The poor CEO is dealing with tons of tasks at the early stage. And sometimes he doesn't have enough time to understand that IP is important. Some of them are aware, let’s say second-timers, some of them understand because they heard their friends or lectures, but others do not - so we educate. For these guys, we help them build their initial IP roadmap according to their short and medium plans.”
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The concept of an IP portfolio is to make sure that a collection of inventions can be protected. According to Hausman, one patent alone usually is not enough. While the number can vary between three or 20, the main idea is to prioritize the patents that are the most efficient in cost, resource, and significance. To license one patent would mean spending the average monthly salary of a software engineer - $10,000 - but it could save millions of dollars in the future in terms of lawsuits or potential acquirers who can find solace knowing that what they buy will be protected from “patent trolls” - individuals who purchase patents for the purpose of suing large companies.
“There is a lot of education that needs to be done,” Hausman continues. “In Israel, because it is a Startup Nation, we achieved a relatively good understanding of this need. Make no mistake - the most important thing for a company is the market and the R&D and the product. We don't say that we should first think of IP and then of the product and business. If you don't have a good business or product you won't win irrespective of how many patents you have. It is ok that the executives focus on this, but what we are telling them is that if they neglect the issue of IP, they may regret it.”
A common example that Hausman uses when describing the risks and rewards of patenting your technology is during tenders that pit two companies against each other. If there is a call for two services and one company offers them, but another offers three services, the buyer might choose to spend more money on the company that offers more services if they are patent-protected and prevent competition from mimicking additional services that go above and beyond the call for action. “This is a simple business scenario that happens where you didn't sue anyone, but it helped you to win the tender,” he explains. “It doesn’t guarantee that companies win the tender, but it gives more tools and ammunition to win it. You have more cards to play: It is defensive, not offensive.”
Of course, the IP game is not always fun and games - and while it is ideal that patents are filed on a defensive level, there is inevitable hostility in the battleground to secure inventions. In 2018, Israeli company and Reinhold Cohn Group client Corephotonics filed a lawsuit against Apple alleging that the duel-lens camera systems in some iPhones infringed on 10 of its patents. In 2019, it filed an additional lawsuit, and that same year, the company was bought by Apple’s competitor Samsung for $155 million. The purchase meant that Samsung now owned all the alleged patents that were at the center of the lawsuit. In 2021, the U.S. Court of Appeals sided with Apple.
Corephotonics was attractive to Samsung because its technology was protected by patents that ensure that the buyer can avoid risk from those who file lawsuits. Even though it was not successful against the trillion-dollar company, Samsung clearly saw value in purchasing not just the team but the technologies and the licensing that are in place as innovations continue.
As the tech crisis continues to impact companies around the world, IP will remain an important tool in the belt of companies that have to make difficult decisions on where to cut their budgets. For some, it might be reducing the marketing teams. Others might find value in laying off several software engineers who are exceptionally expensive. Those who build a collection of IP patents in the form of a strong portfolio might find themselves in a strong position to sell their licenses or become more attractive to buyers.
“IP is not the main issue, but it traps the package in a way that gives you certain advantages. A strong portfolio reduces the risk of being involved in patent litigation because the other party understands that if they sue you, you might sue them… Those who understand that part of the game is IP will understand that it is important to keep it,” he concludes.
