3.Advanced Regional Balance Issues

Having looked at a situation where a company holds few patents in a high revenue-generating region, let us now look at the opposite situation. Are there times when it might makes sense to hold more patents than required under a simple regional sales revenue analysis?

The answer is yes. There are two additional issues with respect to regional IP portfolio balance that might lead to a large portfolio even where the revenue numbers seem to point toward only a small portfolio. These are (1) the location of revenue-related activities other than final product sales; and (2) the regional sources of key competitor revenue streams.

For companies that make products, revenues begin with manufacturing. Protecting its technologies in countries where manufacturing takes place is therefore an important goal. Where a company sells few products in a manufacturing center, it might be wise to go beyond the revenue-proportion approach described earlier in this Chapter. Patent protection may protect a company even in countries where revenue is not directly produced. In particular, patent protection may be sought in non-revenue-producing countries in the following cases:

●Where key components of a final product are made and/or distributed;

●Where a company has research and development (R&D) facilities and activities;

●In countries where there are no current sales, but which may represent growth markets in the future, and so may some day produce sales revenues.

Obtaining patents in countries where components are made protects revenue by slowing down or preventing the emergence of competition in these countries. This is important where a component gives a primary, unique advantage to a product. Even though final product assembly occurs in another country, patenting a component where it is made guards against “leakage” of your company’s technology to other component manufacturers.

Although R&D does not directly produce revenue, it can be important in generating new technologies that will yield revenue in the future. Patenting in R&D centers helps protect R&D investments. Often, R&D takes place in locations where large numbers of talented researchers live. Silicon Valley and Shenzhen are two examples, among many. It is very common for researchers in these places to move from one company to another, or to leave a company to form a startup company of their own. It is also very common for researchers from different companies to come together periodically at conferences, technical meetings, etc. In this environment, patents are necessary to prevent the “leakage” of technological information from your company to a competitor. Sometimes intentionally and sometimes accidentally valuable research moves out from the company that created it and into a competitor company. Patents help prevent this from happening too often.

Predicting future growth markets is an important task for a growing company. Patent protection should be part of this planning. In fact, a company with a well-run IP department will include IP planning among the earliest parts of the company that are involved in plans for expansion. This is because lead time is crucial, especially for patent protection. As we have seen, it takes three or more years from the time of filing to obtain a patent in many countries. Therefore it is important to begin filing patent applications as soon as there are plans to expand company operations into a new country. Although it is possible to acquire existing patents - to buy already-issued patents from other inventors and companies - this is usually more expensive than filing and pursuing your own patents. In addition, buying patents from others is usually only a short term strategic solution. In time, a company will need to begin acquiring patents in all countries where it plans to operate. It makes sense to begin this as soon as possible.