Patent Fencing – Detailed Overview

What is a Patent Fencing?

Patent fencing is a strategy used by companies and individuals to protect their intellectual property and maintain competitive advantages by obtaining and strategically managing patents. In other words, patent fencing is about creating a strong patent position to control and influence the technological landscape.

Types of Patent Fencing

Based on its strategic applications, patent fencing can be categories into two types:

• Defensive Patent Fencing: This type of patent fencing includes accumulation of patents to develop a fence against infringement lawsuit from the competitors.
• Offensive Patent Fencing: This type of patent fencing includes accumulation of patents to develop a fence to deter competitors from entering in a particular domain.

Key Tactics Used

The patent fencing process comprises of following key tactics:

• Acquiring Broad Patents: Companies seek broad patents that cover a wide range of applications or potential future innovations. This helps protect market share and also prevents competitors from entering similar areas.
• Strategic Patenting: Companies often file patents not only to protect their own innovations but also to prevent competitors from patenting related technologies. This can involve filing patents on various aspects of an invention or on incremental improvements. Companies may build a thick layer of patents around a technology area. This makes it difficult for competitors to navigate without infringing on existing patents, thus discouraging them from entering the market.
• Defensive Patenting: Companies may accumulate patents as a defensive measure to avoid litigation or to have leverage in negotiations with other patent holders.
• Cross-Licensing Agreements or Patent Pools: Companies often engage in cross-licensing agreements or form patent pools, where they exchange rights to their patents. This can prevent disputes, reduce litigation risks and lower costs of technology development.
• Patent Litigation: Companies may use their patent portfolios as a weapon in legal disputes, either by suing competitors for infringement or by using the threat of litigation to force settlements or licensing agreements.

Advantages of Patent Fencing

There are following benefits of using the Patent Fencing as a strategic tool:

• Barrier to Entry: By obtaining broad and strategic patents, companies can create significant barriers to entry for competitors. This helps protect market share and can prevent new players from easily entering the field.
• Competitive Advantage: Holding a comprehensive patent portfolio can give a company a competitive edge by covering a wide range of technologies and applications. This enables the company to control the development and commercialization of innovations within their patent scope.
• Revenue Generation: Patents can be monetized through licensing agreements or royalties. By granting permission for other businesses to utilize patented innovations, a well-managed patent portfolio can produce a sizable amount of income.
• Legal Leverage: A strong patent portfolio provides leverage in legal disputes. Companies with extensive patents can use them to negotiate settlements, defend against infringement claims, or even use the threat of litigation to gain favourable terms in business negotiations.
• Deterrence of Infringement: A robust patent portfolio can deter competitors from infringing on patents, as the risk of facing a lawsuit or a costly legal battle can be a strong deterrent.
• Strategic Alliances: Patents can facilitate strategic partnerships and cross-licensing agreements. By offering access to their patents, companies can forge alliances that benefit both parties, such as sharing technologies or entering new markets together.
• Enhanced R&D Opportunities: By securing patents on various aspects of a technology, companies can protect their R&D investments and encourage further innovation. Patents can also provide a roadmap for future research and development efforts.
• Market Control: Controlling a key technology or innovation through patents allows a company to set standards and influence market trends. This can be particularly advantageous in industries where standards are crucial for widespread adoption.
• Defensive Position: Patent fencing can also be used defensively. By acquiring patents in areas where competitors are active, companies can protect themselves from being sued for infringement and reduce the risk of costly legal battles.

Disadvantages of Patent Fencing

Although Patent Fencing are useful in preventing others from patenting an idea, but it also has some drawbacks. The drawbacks are:

• High Costs: Filing and maintaining numerous patents can be expensive. Costs include legal fees, patent application fees, and ongoing maintenance costs.
• Complexity: Managing a large patent portfolio can become complex, requiring significant resources and expertise to track and enforce. Companies might face challenges in enforcing patents internationally, complicating global business operations.
• Potential for Litigation: Aggressive patent strategies can lead to costly legal battles, either as the plaintiff or the defendant, and can strain relationships with other industry players. Overly aggressive patent strategies can harm a company’s image, potentially leading to negative perceptions as a “patent troll” or obstructive entity.
• Innovation Stifling: Excessive patenting may deter other companies from innovating or entering certain technology fields due to fear of infringement or legal challenges.
• Limited Return on Investment: Not all patents will result in commercial success or significant revenue, and some may become obsolete or irrelevant over time.
• Resource Diversion: Significant resources devoted to patent strategies might detract from other critical business areas, such as product development or market expansion.

Conclusion

Patent fencing can be a powerful strategy for protecting and leveraging intellectual property, offering advantages like competitive barriers, legal leverage, and potential revenue streams. However, it also comes with challenges, including high costs, complexity, and the risk of stifling innovation or facing legal disputes. The ultimate effectiveness of patent fencing depends on a company's ability to manage these factors and balance strategic patenting with other business priorities.

Disclaimer: This article was first published in the S&A Law Offices - 'Intellectual Property (IP-Tech)' newsletter in August 2024.