Building Valuable Patent & Trademark Portfolios: A Roadmap for Selecting Which Assets to Formally Protect
Elizabeth Herbst Schierman
Published January 2022
Intellectual property—like patents, trademarks, etc.—is reportedly “the most valuable asset class on the planet,”1 and a company’s intangible assets are often the largest percentage of the business’s value. This value percentage has nearly tripled in the past thirty-five years, from 32% in 1985, to 80% in 2005, and to 90% in 2020 for the S&P 500 companies.2,3 But, while patent-forward companies like IBM spend hundreds of millions of dollars annually on patents alone,4 most companies understandably have more limited resources and must select which assets to formally protect.
Identifying the inventions and trademarks of the greatest potential value is an important step in allocating limited resources to maximize the value and strength of a company’s patent and trademark portfolios. This article provides a roadmap of what businesses should consider when selecting the inventions to patent and the trademarks to register.
Identifying All Potentially-Protectable Inventions and Trademarks
First and foremost, it is important for any company to recognize all the invention and trademark assets the company possesses.
Patentable inventions extend beyond just devices, machines, and other physical articles of “manufacture,” to subject matter such as processes (e.g., methods of fabrication or use), compositions of matter (e.g., innovative materials),5 and designs.6 Even improvements to already-known inventions may be patentable.7 One “product” may be associated with numerous inventions, any or all of which may be patentable if novel (i.e., not previously patented or otherwise publicly known technology),8 non-obvious (i.e., not an obvious modification of known technology),9 and useful.
Trademarks, too, extend beyond just logos to practically any indication of the source, sponsorship, or endorsement of goods or services.10 Each such “mark” may be separately registerable. For example, a business may have a standard character company name (e.g., MCDONALD’S®11), nicknames (e.g., MICKEY DS®12), product names (e.g., BIG MAC®13), design logos (e.g., the McDonald’s arches14), mascots (e.g., Ronald McDonald15), trade dress (e.g., a restaurant’s yellow awning16), or even sound marks (e.g., the A-B-C-E-D audio tone note progression17 of the “I’m Lovin’ It” commercials).
With very few exceptions, the only way to hold exclusive rights to make, use, offer to sell, or sell an invention within the United States, or to import the invention into the United States, is to secure an issued U.S. patent.18 Without a patent in hand, there is usually no way to prevent a competitor from making and selling the same invention, whether copied from the original or independently produced.
Enforceable and exclusive trademark rights, on the other hand, may arise through use of the trademark, even without a trademark registration. However, unregistered (i.e., “common law”) trademark rights tend to be limited and difficult to enforce. Federal registration provides significant
benefits, including a presumption of ownership and nation-wide exclusive right to use the registered trademark on or in combination with the goods/services listed in the trademark registration.
Selecting the Inventions to Patent
Once all the “inventions” have been identified, deciding which to protect via a patent should include considering more than just the cost of the patenting process.19 The following considerations are aimed at prioritizing the inventions with the greatest potential for valuable patent protection:
Has the invention already been publicly disclosed?
Under U.S. patent law, once an invention has been made public, a one-year, non-extendable window opens for filing a patent application.20 When the window closes, so does the opportunity to secure a U.S. patent. In most other countries, the opportunity to seek a patent ends immediately upon a public disclosure of the invention, regardless of where in the world the disclosure occurred.21 (Thus, it is usually best to file a U.S. patent application before any disclosure of the invention to preserve the right to file foreign or international patent applications claiming priority to the U.S. filing.)
Is the invention new, non-obvious, and useful compared to prior-known technology in the relevant field?
Novelty, non-obviousness, and utility are the three primary requirements for patentability. The more similar an invention is to already-existing technology (i.e., “prior art”), the lower the likelihood of acquiring a patent and the more challenging, time consuming, and costly the patenting process is likely to be. This is also why a pre-application patent search, conducted by a knowledgeable patent practitioner, is usually advisable and provides an opportunity to evaluate the invention’s patentability and to focus the patent application toward the most innovative aspects of the invention.
How difficult would it be for a competitor to compete without using the innovative features of the invention?
The importance of this “design-around” consideration should not be overlooked. Any new, non-obvious, and useful invention may be patentable, but if a competitor could avoid practicing the invention and still have a competitive product—e.g., in terms of cost and performance—in the marketplace, a patent would hold little real-world value to the patent owner. On the other hand, if a competing product would be inferior or overly costly to produce or use without benefit of the invention, the more valuable a patent on that invention is likely to be.
What is the likelihood of a competitor reverse engineering or independently developing the invention?
A patent provides exclusive rights in an invention to the patent owner in exchange for publicly disclosing certain details about the invention.22 Contrarily, a process, composition, or other product maintained as a “trade secret”—and therefore not publicly disclosed—may be protected from misappropriation by others.23
Trade secret law does not prohibit “reverse engineering,” such as independent examination of a commercially available, not-patented product to discern its features and then copying or modifying those features for a competing product. Trade secret law also does not prevent a competitor from independently developing the same process, composition, etc.
The higher the likelihood for competitor reverse engineering or independent development, the greater the value of patent protection. And, even for a patented product, the value of the patent depends on the scope of the claims, which should be crafted to cover foreseeable reverse engineering and other “design arounds” for competitor products.
Are subsequent, improved versions of the invention contemplated?
If an initial invention is likely to lead to modified versions down the road, securing broad patent protection for the initial invention is advisable, as are continuing patent applications (e.g., continuations, divisionals, and continuation-in-part patent applications) for the later “improvement” inventions. Skipping a patent application for the initial invention with a plan of patenting the later improved versions is ill advised because the initial, marketed (i.e., publically disclosed) invention will likely constitute “prior art” to the later-filed patent application, limiting the scope of potential protection available for the later improved versions.
Would patent infringement be detectable?
To prove patent infringement, the patent owner generally must prove, e.g., that an infringing device includes each and every claimed feature of a patented device, that an accused infringer has performed each and every claimed act of a patented process, and that an accused material includes each and every claimed ingredient/property of a patented composition. If examination of a competitor’s products would not enable a patent owner to determine whether or not each and every claimed feature, step, or ingredient/property has been practiced, then the patent is of little real-world value.
How litigious is the industry?
Patents are commonly understood to be swords for battling nefarious infringers, but the protective shield-like aspects of patents are often overlooked. A non-litigious company may think it unnecessary to secure patents if it has no present intention of ever enforcing patents in court. However, if that same company finds itself accused of infringing a competitor’s patents, having a strong patent portfolio of its own may provide opportunities for counter-claims, settlement leverage, and cross-licensing. One notorious company recently vowed not to initiate patent suits against others while warding off lawsuits and patent validity challenges against it.24 Accordingly, building a diverse patent portfolio strengthens both sword and shield, the latter being very helpful in a litigation-prone industry.
How does the product’s expected commercial lifetime compare to the potential patent lifetime?
Generally, a U.S. utility patent is enforceable from the date the patent issues (also known as its “grant” date) until it expires, which—if all necessary maintenance fees are paid during the life of the patent—is a twenty years from the first effective filing date of the patent application.25 But, it takes an average of about two years to secure a patent.26
If a new product is likely to become commercially obsolete within its first two years in the marketplace, investing in the usual patenting process may not provide much value to the company. That said, there are opportunities to expedite the patenting process for additional cost,27 and these opportunities should be considered for innovations with shorter commercial lifetimes.
The previous list of considerations is by no means exhaustive, but is intended to be a useful tool for allocating limited resources toward protecting the inventions with the greatest potential value so as to grow a patent portfolio of maximum value to the company.
These considerations also reflect best practices for securing the strongest patent protection for an invention once the decision to file a patent application has been made. These best practices generally include, e.g., keeping inventions secret before filing a patent application; engaging a patent practitioner to conduct a patent search and evaluation before drafting a patent application; tailoring patent claims toward innovative features while avoiding room for “design-arounds”; omitting trade secret information, where possible, in patent applications; drafting patent claims with all contemplated alternatives and improvements in mind; tailoring patent claims toward detectable features; and diversifying patent claims for strong patent portfolios.
Once the decision has been made to pursue patent protection for an invention, an appropriate prosecution strategy should be crafted to make best use of limited resources. For example, “small entity” and “micro entity” patent applicants may reduce required U.S. patent fees by 50% or 75%, respectively. Starting with a “provisional” patent application (i.e., a generally low-cost, informal application) may be a good strategy for businesses wishing to minimize initial costs and/or test the market with an inventive product, process, services, etc., for up to a year before investing in a full “nonprovisional” patent application.
When foreign—in addition to U.S.—patent rights are of definite interest, a single international patent application (known as a “PCT” or a “Patent Cooperation Treaty” application) may be filed first and used to retain the opportunity to later file for patents in any or all of more than 150 PCT-contracting countries/regions, including the U.S. This strategy can generally delay country-specific patenting costs for thirty or thirty-one months.
When filing a PCT application, the “International Searching Authority” (ISA) (i.e., the country whose patent office is selected by the applicant to examine the claims of the PCT application) should be strategically selected, too. For example, if Europe is an expected primary market for the invention, the European Patent Office (EPO) may be a good ISA choice and worth its relatively higher fees. Alternatively, the Korean Intellectual Property Office (KIPO) is generally a lower-cost ISA and may be good selection in some technology areas. Pursuing patents in more than one country may also provide opportunities to use patenting success in one jurisdiction to expedite the patenting process and save cost in other jurisdictions, by virtue of the widely-available “Patent Prosecution Highway” (PPH).
So, after deciding to file a patent application, the next steps should be just as carefully considered, planned, and tailored according to the particular needs and goals—budgetary and otherwise—of the business and invention.
Selecting the trademarks to register
As for trademarks,28 the considerations for deciding which marks to register in the U.S. and/or abroad go beyond merely identifying names and logos used in interstate commerce as indications of the source, sponsorship, or endorsement of the goods and services. These considerations should include all of the following:
Which marks are most used by the company to distinguish itself and its goods/services?
A company may refer to itself in many ways, such as by a formally-registered business name, an assumed business name (i.e., a “d/b/a” name), initials, etc. The same may be true for individual product names and product line names. The names and symbols (i.e., the “marks”) most used by the company to distinguish itself and its goods/services from others are the marks most valuable for trademark registration.
Which marks are most used by others when referring to the company or its goods/services?
Regardless of how frequently a company refers to itself by its formally-registered business name or refers to its products by their company-chosen product name, its customers, its competitors, or others may choose to use alternative names, nicknames, initials, etc. These more frequently used marks may, therefore, gather more “good will” and a stronger association between customer and company than the marks frequently used by the company alone, making registration of these marks relatively more valuable to the company.
Which marks would lead to damaging confusion if a competitor were to start using something looking or sounding similar in association with similar goods/services?
The marks that, if adopted either exactly or similarly by a competitor, would result in the most confusion of customers and/or the greatest reputation damage to the company, are the marks that should be highly prioritized for formal federal registration. A competing product of inferior quality, marketed under a confusingly similar name or logo, is likely to lead customers to distrust the quality of the original product. Bad press about a similarly-named competitor may tarnish the reputation of the original company, too.
This concern may be greatest for goods/services marketed to consumers not likely to exercise great care in their purchasing decisions. For example, purchasers of relatively inexpensive goods on massive online shopping venues may be less likely to be investigate the seller and quality of purchased goods than purchasers of high-priced items sold in person by clearly-authorized distributors and in negotiated transactions.
The greater the likelihood and extent of damage—to company and/or goods/services reputation—if a competitor were to adopt a confusingly-similar mark, the more highly prioritized formal trademark registration should be.
For which marks would it be most detrimental if the company could not expand into additional geographic areas and/or goods/services areas?
Without a federal trademark registration, the scope of common law trademark rights is generally limited to only the areas of actual use. This more limited scope of rights of the common law trademark owner leaves open the chance for another to establish exclusive common law trademarks rights in the other areas (e.g., other geographic areas; other goods/services areas) or even to secure a federal trademark registration, either of which may inhibit the initial common law trademark owner from expanding its own trademark use or securing federal trademark registration. Accordingly, the marks for which expanded use is a possibility should be prioritized for trademark registration.
Which marks are expected to be in use long term and without significant change?
If a mark will be used only for a short time (e.g., for a one-season product line; for a one-time pop-up store) or if the mark is likely to be changed before settling on a final form (with a change in spelling, phrasing, design, etc.) federal trademark registration is unlikely to provide much value.
Which marks are most unique and distinctive?
The more unique (e.g., fanciful, arbitrary, or at least suggestive) a particular mark is, the more likely the mark will be registerable in the absence of a conflicting registration. Marks that merely describe the associated goods/services (e.g., an ingredient, quality, characteristic, function, feature, purpose, or use of the goods/services) will face rejection and a difficult road for registration.29 Generic terms for the associated goods/services are not registerable, period.30
At least for planned—but not yet in use—marks, is the mark available to use and register?
A mark not yet being used in commerce, but for which there is a good faith intention to make such use in the near future, may be the subject of a federal trademark registration application on an “intent-to-use” (ITU) basis.31 However, before choosing a new trademark to adopt and register, it is generally wise to have an experienced trademark attorney conduct a trademark search to see whether someone else has conflicting trademark rights, whether registered or unregistered.
In addition to the above, foreign manufacturing and/or markets raise the likely value of securing trademark registrations, in the U.S. and abroad, and should be carefully considered.
By identifying the inventions and trademarks with the highest potential value to the company, limited resources may be smartly allocated, and the patent and trademark portfolios developed by the company can provide the strongest possible protection to the business’s intangible assets.
Elizabeth Herbst Schierman is an intellectual property attorney in Boise. She handles patent and trademark application prosecution around the world. She is a three-time past Chair of the Intellectual Property Law Section and a long-time member of the Advisory Board for the University of Idaho’s Department of Chemical & Biological Engineering.
1. John P. Ogier, Intellectual Property, Finance and Economic Development, WIPO MAGAZINE, Feb. 2016, https://www.wipo.int/wipo_magazine/en/2016/01/article_0002.html.
2. Bruce Berman, Latest Data Show That Intangible Assets Comprise 90% of the Value of the S&P 500 Companies, IP CLOSEUP, Jan. 19, 2021, https://ipcloseup.com/2021/01/19/latest-data-show-that-intangible-assets-comprise-90-of-the-value-of-the-sp-500-companies/.
3. Aran Ali, The Soaring Value of Intangible Assets in the S&P 500, VISUAL CAPITALIST DATASTREAM, Nov. 12, 2020, https://www.visualcapitalist.com/the-soaring-value-of-intangible-assets-in-the-sp-500/.
4. See Thomas Alsop, Companies with the Most Patents Granted 2020, STATISTA, Feb. 1, 2021, https://www.statista.com/statistics/274825/companies-with-the-most-assigned-patents/ (identifying IBM as the company with the most U.S. patents granted to them in 2020, at 9,130 issued U.S. patents); see Pedram Sameni, Patexia Insight 94: IBM’s US Patent Budget is Estimated Around $280M Annually, PATEXIA, Oct. 28, 2020, https://www.patexia.com/feed/patexia-insight-94-estimating-the-ip-spending-for-uspto-s-largest-client-20201027.
5. Machines, manufactures (e.g., devices), processes, and compositions of matter are protectable by “utility” patents. See 35 U.S.C. § 101 (“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”)
6. Designs are protectable by “design” patents. See 35 U.S.C. § 171(a) (“Whoever invents any new, original and ornamental design for an article of manufacture may obtain a patent therefor, subject to the conditions and requirements of this title.”)
7. 35 U.S.C. § 101.
8. 35 U.S.C. § 102.
9. 35 U.S.C. § 103.
10. See 15 U.S.C. § 1125(a).
11. U.S. Trademark Registration No. 743,572, registered Jan. 8, 1963.
12. U.S. Trademark Registration No. 1,292,557, registered Aug. 28, 1984.
13. U.S. Trademark Registration No. 1,126,102, registered Oct. 16, 1979.
14. See, e.g., U.S. Trademark Registration No. 4,568,939, registered July 15, 2014.
15. U.S. Trademark Registration No. 1,017,161, registered July 29, 1975.
16. U.S. Trademark Registration No. 4,676,898, registered Jan. 20, 2015.
17. U.S. Trademark Registration No. 3,034,331, registered Dec. 27, 2005.
18. See 35 U.S.C. § 271.
19. See Gene Quinn, The Cost of Obtaining a Patent in the US, IPWATCHDOG.COM, Apr. 4, 2015, https://www.ipwatchdog.com/2015/04/04/the-cost-of-obtaining-a-patent-in-the-us/id=56485/.
20. 35 U.S.C. § 102 (“A person shall be entitled to a patent unless . . . (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States . . . .”).
21. See, e.g., European Patent Guide § 3.3.001 (discussing the principle of “absolute novelty”), available at https://www.epo.org/applying/european/Guide-for-applicants/html/e/ga_c3_3_1.html.
22. See U.S. Constitution, Art. I, Sec. 8, Cl. 8 (“To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries . . . .”).
23. See 18 U.S.C. § 1836; Idaho Code § 48-801.
24. Elon Musk, All Our Patent Are Belong to You, TESLA, June 12, 2014, https://www.tesla.com/blog/all-our-patent-are-belong-you (promising that “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology”). “Acting in good faith” involves certain requirements, such as not asserting patents or other intellectual property rights against Tesla, not challenging any Tesla patent, and not knocking-off Tesla products. Patent Pledge, TESLA, last updated Nov. 7, 20214, https://www.tesla.com/legal/additional-resources#patent-pledge.
25. 35 U.S.C. § 154(a)(2) (“Subject to the payment of fees under this title, such grant shall be for a term beginning on the date on which the patent issues and ending 20 years from the date on which the application for the patent was filed in the United States or, if the application contains a specific reference to an earlier filed application or applications . . . from the date on which the earliest such application was filed.”).
26. Patents Data, at a Glance August 2021, UNITED STATES PATENT AND TRADEMARK OFFICE, Aug. 2021, https://www.uspto.gov/dashboard/patents/ (listing “traditional total pendency” as 23.2 months).
27. USPTO’s Prioritized Patent Examination Program, USPTO, last visited Oct. 10, 2021, https://www.uspto.gov/ patents/initiatives/usptos-prioritized-patent-examination-program.
28. The terms “trademarks” is used generally in this article and includes all types of “marks” used in trade, including service marks, trade dress, collective marks, etc.
29. Possible Grounds for Refusal of a Mark, USPTO, last visited Oct. 10, 2021, https://www.uspto.gov/trademarks/ additional-guidance-and-resources/possible-grounds-refusal-mark.
30. TRADEMARK MANUAL OF EXAMINING PROCEDURE § 1209.01(c).
31. Trademark Applications – Intent-to-Use (ITU) Basis, USPTO, last visited Oct. 10, 2021, https://www.uspto.gov/ trademarks/apply/intent-use-itu-applications.