This course assumes no prior knowledge in law, business or engineering. However, students with backgrounds in all three areas will find useful concepts or ideas in the course on how to protect business innovations using patents. The approach taken in this course is practical and commercial rather than theoretical. A combination of lectures and case studies help to illustrate the concepts and make the course more interesting. After completing this course, students should be able to understand how patents are issued and protect innovations, including: What is a patent? What do they protect? How do we get a patent? Where are patents valid? How much do they cost? In addition to basic concepts the course also deals with advanced topics such as: software patents, business process patents, patenting life, patent trolls and multiple case examples of large and small companies using patents and patent lawsuits. We also expect you to have fun in this course. So go forth and enjoy!
4.5 Grim Reaper and Pretzel Crisps
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Из курса от партнера The Hong Kong University of Science and Technology
Protecting Business Innovations via Patent
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The Hong Kong University of Science and Technology
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ADVANCED PATENT TOPICS
You left room for dessert right? In this week we learn about patent trolls, software patents, business process patents, patenting life and case examples of large and small companies using and going to court over patents.
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Theodore Henry King CLARKAssociate Professor
Information Systems, Business Statistics and Operations Management Department
Welcome back to our course on Protecting Business Innovations via Patents.
Today we're going to be talking about some other case examples.
What do I mean by other cases?
Well, we're going to look at three cases of companies that I know something about,
and they're small companies.
I mean, I know something about Apple and Samsung,
but I don't know the people involved and I don't
know that much about the details of their business operations.
But Grim Reaper, I know the CEO. I've talked to him.
I understand some of the problems he faces and some of the challenges as
a small business owner who has patents and is frustrated.
I know one of the leaders of the Group of Surgeons that came up with some patented ideas,
that came to a group that I'm with,
a group of angel capital investors called Utah Angels in Utah,
where I got to know Grim Reaper and this Group of Surgeons,
as they came in and pitched their patented ideas and
their entrepreneurial ideas and business plans to raise capital,
either to go to court or for expanding their business.
So, I know something about successes or
problems and I know something about the Pretzel Crisps Company,
a family business that was particularly
interesting and used as part of our trademark course about trademark lawsuits.
It will also be talked about in our Strategy course,
but it's also illustrative of patents
and type of patents on products you may not
think about getting patents on: consumer goods,
fast moving consumer goods.
And so, these three family-owned small entrepreneurial businesses are
some interesting examples of patents and some
of the challenges of patent law in a small business context.
A Grim Reaper makes arrows.
If you want to go to the website,
you can see some really gruesome or maybe very appealing depending on your perspective.
I have videos of shooting Bambi,
or deer or somebody else.
I mean, I like the CEO,
I think the company is a nice company.
I think their products are intriguing but I personally don't really
like to see a deer get shot all that much or other animals.
Although, I am impressed if you're going to go out hunting,
I like an arrow much better than a gun and I think it's much more challenging,
much more manly to be able to go out and pitch
yourself against a huge beast with nothing but an arrow.
That's pretty cool. And these are pretty cool arrows.
If you're gonna use an arrow,
let's use an arrow that will kill every time and it's very very effective.
These are specialty arrowheads.
They sell for perhaps as much as 15 or
20 times what a generic cheap arrowhead would sell for but they're much better.
They have many patents on their products.
At one point, they had a large e-commerce company start
selling their products online and a catalog company selling
online for cheaper prices to end
consumers than they were selling to their specialty retail stores.
So, the customer could buy online a competing product that
infringed on their patents for less than their wholesale price to their retail stores.
That was a problem.
And, they didn't have enough money to be able to pay a patent attorney to go to court.
This could be a positive role where a patent troll could play.
And one of the things I talked with the CEO about is,
in the future if they really do need to
try and figure out a way to set up something like this,
perhaps what they could do as entrepreneur or small business transfer
your patent ownership rights to a small company that owns nothing but your patents.
That company then licenses to your manufacturing company the patents.
So, you license from that intellectual property business
and pay them a fee for your exclusive rights to use your product.
That intellectual property company could sue.
It could sue other people and you might be able to transfer some ownership or transfer
rights for the proceeds from a lawsuit to a patent troll and say, "Look.
You allow me to manufacture on an exclusive basis with my patent,
I'll let you have the profit from suing
other companies on my behalf to stop them from competing with me.
I'm not in the business to make profit,
I'm in it to protect my product.
But you, a patent troll,
you're out for the profit.
If you can help me stop them,
I will allow you to use my patents as a tool to make money."
And so, that might be a synergy or win-win scenario with the patent troll.
It's probably the most positive example I can come up with,
how to make a patent troll less offensive.
But the challenge is somehow you've got to find a way to deal with this.
Well, Grim Reaper did.
One of the things they found is,
not only was their competitor selling in mail order catalogs and then online,
but they also then started selling through their stores.
Now, this really upset Grim Reaper because
most of their products were sold in retail stores not sold online.
Remember, people who go out and hunt with
an arrow are not doing it so they can put meat on the table,
they could do that with a gun.
It would probably be cheaper and it would certainly be easier.
But they're doing it because it is a brave bold thing to do,
to be out man versus beast in the wild using
nothing but an arrow you take down this and you want bragging rights.
And so, they were worried about retail stores with not the same product,
but it's a product that violates their patents and it's competing with their product.
And so, what they did is they threatened to sue the retailers.
Now, retailers are small businesses.
These are family-owned businesses and they said,
"Well, you're threatening to sue me.
I would have to hire an attorney.
This would be terrible. I can't.
I can't afford to go to court,
I can't afford to defend myself,
this is a terrible outcome."
And Grim Reaper said, "Well,
then don't sell these fake products in your store and you won't get sued."
And so, all their retail stores stopped selling the clone products,
the patent violating products. They got them out.
Now, you can still buy them on Amazon,
you can still get them from China where Grim Reaper
doesn't have a patent so people can copy their products.
You can still find them imported and sold through Amazon,
but most of the arrowheads,
most of the business is going through retail stores that are more like a club,
sort of like a lot of beer is sold in
bars at much higher prices than you can buy on Amazon.
A lot of arrowheads are sold at
community arrow-hunting stores where
people gather and talk about their latest adventures.
They also found an attorney willing to sue
the Mail Order company and accept a contingency fee.
Sort of like what I recommended with a patent troll and this is unusual for attorneys.
What they found is an attorney who doesn't have much experience with
patent law and is willing to take the case even though he's not very good at this.
It's not his specialty.
It's not his forte, but he had the legal qualifications to represent
them and they were able to file a case in court and the attorney said,
"You don't have to pay me in cash,
I'll take my percentage of the winnings."
This is essentially like what you would want a patent troll to have
done but most attorneys won't take patent cases this way.
Grim Reaper was very good at finding an attorney who would.
So, that was an outcome for Grim Reaper.
Another interesting and positive outcome was a small business
Group of Surgeons who obtained patents for several medical devices.
They had eight or nine patents that they had gotten on medical devices for use
in orthopedic surgery and they sold some of these patents to large corporations.
They kept some of them,
they used the cash,
they got millions of dollars for selling three of their patents to build the business,
to do the production,
to do the marketing and to have a cash reserve of several million dollars in cash,
in reserve to be able to file lawsuits.
So, they were willing to sell some patents to
competitors in order to have money to stop others from copying their idea.
They had to balance cash versus intellectual property.
If you don't have enough money to sue,
your patents may not be worth much.
If you sell some of your patents,
the rest of your patents may be worth a lot more.
Finally, Pretzel Crisps.
They've got a patent on the process for making their product.
We have a whole video on this and so we'll put
that up and you can learn more about Pretzel Crisps.
Mostly this company is about trademark and about a trademark lawsuit.
But the important thing here is that patents gave them
time to stop competitors from being able to come out with a new product.
They spent years developing their process to make
these cool Pretzels that are zero fat and very tasty,
they're very crunchy, they taste sort of they have
the crispy flavor of a potato chip with zero fat.
Zero fat is very unusual for a crispy snack food.
And so, that was part of the output of their patent that gave them an advantage.
That gave them time to build their brand.
The brand is where they ended up in court and they had
some interesting challenges as well with lawsuits as a family-owned business.
Summary takeaways.
Balancing Cashflow versus patent rights is important.
Patents give you time to develop brands.
They may not be your end goal,
they may be part of your goal.
And, suing small firms like a retailer is easier than suing large firms.
Small firms are likely to buckle under and say,
"What do you want me to do to avoid this lawsuit?"
And so, it may make sense to go sue even your customers or partners,
rather than trying to sue large online firms or
online firms that are difficult to get a judgment against. Thank you.
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