"Counsel has to routinely decide whether to be a pussy cat
that never enforces or a tiger that jumps on everything that
comes along," says Tilman Breitenstein, director of IP at
global science-based firm DSM. "We can't afford to be either
all the time; we have to be somewhere in the middle."
This the common challenge for companies assessing litigation
strategies for their patents. The trick for in-house counsel is
to build a flexible enforcement strategy to help analyse each
case and decide whether to attack or not. This strategy will
consider industry-specific external and internal factors that
will determine what the firm can get out of an action.
"An enforcement plan is ultimately driven by economic
considerations, such as the cost benefit and relative return on
investment," Bruce Elder, senior legal director at Integrated
Device Technology (IDT), tells Managing IP.
"There are four main factors that should influence every
enforcement decision: the strength of the patent portfolio, the
potential return, the soft cost of acting or not acting, and
Key considerations and opportunities
The first question in-house counsel must ask is whether the
firm has the firepower in its patent portfolio to deliver a
"Having an important patent isn't as important when it comes
to enforcement as having a strong portfolio," a senior patent
attorney at a telecommunications company tells Managing IP.
"All the stuff we buy in switches and routers, for example, is
based on standardised stuff which is covered by several hundred
if not thousands of patents.
"One patent is not going to be a game changer in my
industry. But if you've got a portfolio of at least half a
dozen important patents, it will put you in a much stronger
The strength of a company's portfolio, however, depends on
its industry, which in turn dictates return on investment.
"My company makes semiconductors in everything from mobile
phones to cloud servers," says Elder. "Studies have suggested
there may be as many as 250,000 patents on an average
smartphone. If I have a patent on a $2-part of that phone, how
much am I going to get back?"
He adds that these sort of economics drive defensive
strategy for his business in many cases. But the economic
equation could be radically different in pharmaceuticals or
biotech, for example, where firms might have a single patent
family and key patents in markets that define a $10 billion
"In those circumstances, you are going to enforce your
patents rigorously and cut off any avenue to design around it,"
says Elder. "The strategy is going to be radically different in
At Managing IP's International Patent Forum in London in
March, Huw Edwards, senior IPR litigation counsel at Nokia,
underlined the point that you need a lot of patents to win a
He noted that if each patent has only a 30% chance of
winning, you need at least three to get a win. If the product
lifecycle is shorter than the court process, you have to guess
which features will be in the next product. "Assume you have a
50% chance of guessing right, you need six patents to get a win
on something relevant," Edwards said. However, if 50% of
features can be designed around, you need 12 patents to get a
win on a relevant feature that cannot be designed around. Then,
if you want to persuade someone to take a licence globally, you
need three or four countries – "So that's 48 patents!"
Some in Europe are also keeping tabs on whether
non-practising entity (NPE) litigation will increase. Edwards
referenced a recent Darts IP report that estimated the rate of
NPE activity in Europe has gone up by an average of 19% between
2007 and 2017. "If you read the Darts IP report, patent
monetisers are looking at handset vendors a lot more," said
Edwards. "The UPC will provide another thing in our toolkit to
However, Edwards also noted that NPEs will see the Unified
Patent Court – if it ever happens – as an
opportunity as well. "I strongly think the first people at the
UPC door will be either patent monetisers or generics that have
found something they can knock out at a wider level," he
Others have much simpler concerns when assessing patent
litigation. Also speaking at the Managing IP event, Elise
Cardin, patents director at Saint-Gobain, said in her market of
"old school manufacturing, I have much more basic needs."
She continued: "Do we feel an appetite for these new tools
and the UPC and Unitary Patent when in most cases we deal with
one country? To be honest, I feel I will be very happy with the
local system. So I will sit back and see how Huw does and how
it works." She added, however, that she does see some
opportunities with the UPC such as the potential for forum
Deciding whether to enforce
Businesses that cannot generally pursue aggressive action
could consider putting patents into a pool, for example, which
helps some businesses market assets as part of a one-stop-shop
and generates revenue without costly litigation.
Enforcement returns are also influenced by the jurisdictions
in which in-house counsel typically enforce. In some countries,
it may make commercial sense to negotiate licences rather than
litigate because the former strategy will ultimately generate
better return on investment.
"In many European jurisdictions, such as Germany, you
typically end up with the amount that a reasonable royalty
licence would have delivered, which I think is a very
favourable system for infringers," says Breitenstein at DSM.
"And if you only obtain licence fees for damages, it would have
been better just to get a licence."
The head of legal at a healthcare-focused technology firm
tells Managing IP that he agrees, and adds that the speed of
the courts in some countries adds to this equation. "Legal
proceedings are incredibly slow in countries such as France and
Brazil. We have learned to respect and love certain legal
systems and stay away from others."
Regulation or legislation might also make it difficult, if
not impossible, for some industries to pursue action in certain
countries. Arthur Lallament, IP manager at drug discovery and
development firm hVIVO, says that, while enforcement is not
high on his firm's agenda because it has not developed its
portfolio, the so-called Bolar exemption could make action
difficult in the future because it exempts clinical trials for
generics and biosimilars from infringement in the EU.
Beyond immediate return on investment (ROI), an in-house
enforcement strategy also considers the often more important,
long-term effects of enforcement on the business. Taking action
might generate a lot of revenue but ultimately pale in
comparison to that lost by damage to the supplier ecosystem,
"The nature of our industry makes it very difficult to sue
anyone because all our kit is standardised," says the
telecommunications senior patent attorney. "It is difficult for
me to think off the top of my head of a patent we would enforce
rigorously because we would end up suing our own suppliers and
it probably wouldn't help."
Taking action might also open the business up to
counterclaims. Breitenstein at DSM says firms need to be
particularly aware of that possibility in certain countries.
"You don't want to give anyone the opportunity to counterclaim
for invalidity, so you need to look carefully at your
procedures. If you send a cease and desist letter to infringers
in some countries, for example, that action will trigger the
right to counterclaim."
But long-term damage can also be caused by not taking
action. Though enforcement might not generate significant ROI
in some cases, it could be worth doing to mitigate risk to the
business's reputation. Industries where inferior products could
cause damage to health, such as electronics or drug
manufacturers, should consider public backlash in each case of
Breitenstein adds that if an infringing product is inferior
to the genuine article it may also erode trust in the brand and
the value of the product over time.
"What is clear is that if there is price erosion at some
point in time, you will not be able to reverse it easily."
Enforcement can also help firms establish a strong market
position and discourage infringement. Counsel may want to
enforce a patent to protect a key innovation on a valuable
product that is early in its lifecycle, for example, and stop
competitors thinking they can take advantage of it.
"Sometimes you want to put a bit of fear, uncertainty and
doubt into the industry so people think twice about stepping
over your core innovation," Elder at IDT tells Managing IP.
"You might want to bring an enforcement action or at least
start a licensing dialogue just to take a positon and make
rivals think twice."
The technology manufacturer's head of legal adds to that
point: "We feel that we are King Kong and want to crush
mosquitos. We do not do alternative dispute resolution unless
it is in a battle with an equally respectable company."
The problem with that strategy, Elder adds, is when counsel
comes up against a particularly forceful or aggressive
"There are several companies out there that are notorious
for taking the view: "We don't care. We just want to be in the
market regardless of infringement issues." And if the company
makes the decision that it is more efficient to do that than
worry about you and your patents, it puts a stop to the idea of
targeting a couple of soft targets to establish a position."
Industries change quickly and threats to IP evolve just as
quickly. An effective in-house enforcement strategy keeps up
with these changes and adapts. One way to accomplish that goal
is by monitoring the strategy to ensure it is still
"The point of enforcement is to generate income," says the
telecommunications senior patent attorney. "If you have
forecast for 10X but you only get X, that is the first
indicator that you need to take a new approach."
Another way is to stay on top of industry trends and changes
to the company.
"You are constantly having to look at what is going on in
industry trends but you do not have to look everywhere at
once," says Elder at IDT. "There are a couple of markets that
will define your enforcement strategy. You need to look at
certain jurisdictions and countries and see who is patenting
"You also have to look at your own business constantly,
which is probably a harder thing to do. In my industry, we have
product lifecycles that last two to five years on average and
it takes three to five to develop a patent position. What you
are patenting today might have no relevance by the time you get