1. Disadvantages of Patent Thickets
2. Factors That Contribute To Patent Thickets
3. The Economic Impact of Patent Litigation
4. Deciding Whether To File For Patent Protection

A patent thicket example is a group of overlapping patents in a specific industry owned by many different companies. This creates a situation in which the firms prevent one another from innovating. The products in question require the use of hundreds of different patented innovations, often with unclear ownership and/or owned by competitors or small independent companies. The telecommunications industry is a prime example of a patent thicket.

Disadvantages of Patent Thickets

In addition to disrupting or delaying potential innovation, a patent thicket can:

  • Increase the frequency of patent litigation
  • Increase the complexity of license agreement negotiations
  • Encourage more businesses to patent weaker innovations
  • Increase the costs of patent transactions
  • Reduce profits to innovative companies
  • Limit the incentive for businesses to innovate

In fact, small companies may be completely discouraged from entering industries where patent thickets prevail, such as technology and telecom.

Factors That Contribute To Patent Thickets

Patent filings have been at an all-time high over the past two decades. In 2014, the United States Patent and Trademark Office (USPTO) received almost 580,000 applications, while China received almost 1 million applications in the same year. This would lead the casual observer to believe that innovation is also at its global peak.

The increase in patent applications has been concentrated in Internet-related and digital communication technologies. Although this does indicate an elevated level of technological progress, many experts are concerned about the efficacy of the patent system.

Some policymakers and economists see the dramatic increase in filings as a symptom of problems with the patent system, creating patent thickets that have the effect of discouraging innovation even in the industries that have seen such rapid growth.

The Economic Impact of Patent Litigation

The information technology arena is full of intellectual property (IP) disputes, perhaps none more noteworthy than Apple's recent victory in its long battle with Samsung. In economics, protecting your IP is seen as a reward for innovators that protects future innovators and ensures that the technology is priced fairly in the market. The rise of patent thickets, as well as patent trolls and other unscrupulous strategies, makes striking this delicate balance a challenge.

The New York Times noted in a research report that more than $20 billion was spent in the smartphone industry over the past two years on purchasing and defending patents. In fact, the spending by giants Google and Apple on patents exceeded their research and development spending for the first time ever last year. Others, however, note that the point of having a patent is the ability to enforce it and the increase in litigation doesn't necessarily represent an underlying problem with the patent system.

In the tech sector, companies like Apple and Samsung are codependent on one another if they are in a situation where they need to negotiate with competitors for the right to use patented technology. For example, to make a new smartphone, Samsung may rely on technology owned by both Motorola and Apple. This creates an incentive for these companies to develop their patent portfolios.

Deciding Whether To File For Patent Protection

You may want to consider applying for a patent for your invention if:

  • You are working with a technology that is currently active.
  • Your industry competitors are well-known and well-established.
  • You expect revenue from the invention.
  • You plan to make an initial public offering (IPO) on the stock exchange, which can be challenging to do if you are in the midst of patent litigation.

In fact, companies should begin developing a strategy to protect their intellectual property at least 18 months before launching the IPO. This will ease some of the negotiating pressure. You can also reduce the threat of litigation by leaning on consultants and experts who can help you obtain or license the tech you need to grow. Investors will also be more likely to fund your company if you have a patent pending on your primary idea with little risk of litigation.

Start-ups entering areas that are rife with patent thickets should plan to have extra cash on hand to navigate potential challenges. Examine the industry and the patent activity in the open market to assess your level of risk in obtaining a patent.

If you need help with a patent thicket, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.