What to do when a competitor’s patented product threatens your sales

It’s common that a company’s competitors release a patented product that will have a significant impact on the competitive landscape. It happens often enough that companies need to know what options they have to counter.

“A company cannot always come out with the latest and greatest new invention, so it’s inevitable that at some point their competitors will beat them to the punch,” says John M. Skeriotis, a partner at Emerson Thomson Bennett. “The typical response is to say, ‘Wow, my competitor has a great invention. I guess we need to get out of that product line.’ Most often, staying away is not the best thing for a company. It leaves them with the consequences of a loss of market share, revenue, etc., when there are better alternatives.

Smart Business spoke with Skeriotis about the strategic options companies have to avoid the negative impact from the release of a competitor’s patented product.

How do companies determine the best way to respond to a competitor that has unveiled a patented product the company wants?

The first thing a company should do is review the patent’s history. See what the Patent and Trademark Office found in its search and see what happened in the patent’s history. As is often the case, many things pop out when reviewing the patent’s history that can help a company figure out what is the ideal thing to do.

Once that information has been gathered, companies could choose to design around the product, patent an improvement, challenge the patent or license it.

When should a company design around a product a competitor has patented?

If a company wants to compete, it needs to review its options and to see if it’s possible to design around what was patented. Companies need to hire a patent attorney to review the patent’s history. He or she will meet with the company’s design team or engineers to review what they are thinking and what they are capable of doing in the marketplace that could be an alternative to the patented design.

What should companies understand about patenting an improvement? How does it tie in to possible licensing opportunities?

While it may seem straightforward, it is very difficult to invent an improvement to something already patented. The idea is to invent and patent something that the patent holder wants or needs. That way there may be leverage to negotiate a favorable license or even cross-license one another.

Unless a company knows the patent holder is going to want to grant a license, leverage is necessary to ‘incentivize’ the patent holder to license.

Failing that, there are options in the event that the patent holder doesn’t want to license to the company.

Why would a company challenge a competitor’s patent?

If the patent holder doesn’t want to license, if the license fees are exorbitant, if there is no feasible design around, or if the company has a strong belief that the patent holder should not have been granted a patent, then a company can look to challenge the validity of the patent. The benefit is if the company can find something that pre-dated the invention, then the patent may be invalid or otherwise limited such that a design around is easily feasible. It also gives the company leverage in negotiations.

How might companies benefit from involving a patent attorney as it considers its response?

A patent attorney is the first place to start so that they can review the patent’s history and see where things lie. Quite frankly, hiring a patent attorney is critical to in this process. They should be able to map out a plan to make the patented product while avoiding significant legal issues.

Insights Intellectual Property is brought to you by Emerson Thomson Bennett