The value of a company’s patent portfolio can be increased significantly if the portfolio strategically uses continuing applications (i.e., continuation, divisional, and continuation-in-part applications) to extract valuable protection from disclosures having early priority dates. Such a portfolio can include multiple patents having claims of varying scope but still covering the desired market, thereby bolstering the company’s exclusivity to that market. Even if a competitor is able to get around the claims of one of the patents (e.g., by designing around or by successfully challenging the validity of these claims), the other patents provide additional hurdles to be surmounted by the competitor before being able to access the company’s market. In addition, these multiple patents can provide value by summing to a wider scope of protection (e.g., including multiple forms of the product and various subassemblies that occur at various stages of manufacture) than any single patent provides.
Further value can be provided by keeping at least one continuing patent application pending at the USPTO, the patent application having an early priority date and disclosing subject matter which supports additional claims covering the desired market. Such a pending patent application can be used to strategically respond to the activity of competitors so as to fortify the company’s exclusivity to the market. For example, upon discovering that its competitor has bypassed the existing defenses by designing its product around the company’s issued patents, the company can potentially use a pending patent application to pursue additional claims that cover the competitor’s product, effectively filling the breach in the company’s patent protection. For another example, if its competitor is able to successfully challenge the validity of the claims of a patent (either in a court proceeding or in a post-grant proceeding at the USPTO), the company can potentially use a pending patent application to pursue other claims which do not suffer from the same vulnerability as do the claims of the challenged patent.
An example of such use of continuing patent applications is provided by the family of patents based on U.S. Patent No. 6,600,175 filed in 1996 and now owned by Cree Inc. The claims of the ‘175 patent are directed to solid-state white-light emitters and displays, in particular, various configurations of devices that use blue light-emitting diodes and fluorescent or phosphorescent materials which absorb the blue light and re-emit light at longer wavelengths which sum to form white light.
Key claims of the ’175 patent were the subject of a validity challenge in an ex parte reexamination at the USPTO. This post-grant proceeding was initiated by an unknown entity (likely a competitor of Cree’s seeking to enter the white-light emitter market) by presenting the USPTO with (i) references that pre-dated the filing date of the ‘175 patent and (ii) a rationale supporting the conclusion that the claims of the ‘175 patent are invalid (i.e., the USPTO was wrong to issue the ‘175 patent in view of these references). This ex parte reexamination was successful in getting the USPTO to decide that that key claims of the ‘175 patent were invalid, and this ruling was recently affirmed by the Federal Circuit (In re Cree, Case No. 2015-1365, March 21, 2016). Cree had been suing Kingbright Electronics Co., SunLED Corp., and Harvatek Corp. for infringement of the ‘175 patent, but after this ruling of invalidity of the key claims of the ‘175 patent, these cases have been terminated by stipulated dismissals.
While this result was bad news for Cree, the company’s strategic use of continuing patent applications likely mitigates the damage done by allowing Cree to maintain valuable exclusivity despite the loss of the invalidated claims of the ‘175 patent. The portfolio includes multiple other U.S. patents with differing claims that cover aspects of the white-light emitter market, e.g., U.S. Pat. Nos. 7,615,795, 7,943,945, 8,502,247, 8,659,034, 8,860,058, and 8,963,182. These patents were filed at various times between 2003 and 2013 as either continuations or divisionals (i.e., applications with the same disclosure as that of the ‘175 patent and claiming priority to the ‘175 patent), so each of these continuing applications has the 1996 filing date of the ‘175 patent as its priority date.
These six patents and the ‘175 patent can be denoted pictorially by circles of various sizes and areas of overlap as shown in the figure on the right. (Note that this figure is helpful to demonstrate the value of such a portfolio, but the circles should not be relied upon as a representation of the actual breadth of scope or overlap among the various patents of this particular portfolio.) In addition, for the purpose of this discussion, a supposed high-value area of protection (e.g., Cree’s market in such devices) is denoted in this figure as a black dot.
This high-value area of protection is covered by multiple patents: the ‘175, ‘795, ‘945, and ‘247 patents, illustrating the value of strategically having multiple patents with claims covering Cree’s market. If the ‘175 patent were the only one covering this market, the ruling of invalidity of the key claims of the ‘175 patent (denoted by having a red dashed circle represent the ‘175 patent) would have left this valuable market open to access by Cree’s competitors. However, while the ruling of invalidity of the ‘175 patent claims means that exclusivity may be lost in various other areas, the high-value area is still covered by the other three patents. To gain access to this valuable market, Cree’s competitor must either successfully challenge the validity of the key claims of each of the ‘795, ‘945, and ‘247 patents or design around these key claims. Such validity challenges are actually currently underway: there are three ex parte reexaminations of the ‘945 patent pending or under appeal, as is one ex parte reexamination of the ‘795 patent and one ex parte reexamination of the ‘247 patent (denoted by red solid circles representing each of the ‘795, ‘945, and ‘247 patents).
Cree’s portfolio also includes a continuing patent application (U.S. Pat. Appl. No. 12/131,119, filed in 2008) that is currently pending at the USPTO with the early 1996 priority date of the ‘175 patent and which presumably discloses subject matter supporting additional claims covering Cree’s market. The ‘119 application is denoted in the figure by the solid green circle which encompasses the high-value area of protection. Since the ‘119 application is pending at the USPTO, Cree is able to modify and/or add to the pending claims, and even to file additional continuing applications, to further pursue protection of this high-value area. Cree can do so in a strategic manner that takes into account the competitor’s efforts to design around these patents, the arguments of invalidity asserted against the other patents of the portfolio during post-grant proceedings or infringement litigations, and any prior references that are subsequently found. Such efforts can result in claims that are more narrow than others in the portfolio, but which are more focused on the competitor’s products and more resilient to challenges of validity.
While Cree is a large company with a large patent portfolio, these concepts can be applied equally well to the portfolios of small startups looking either to protect their market niche or to make themselves more attractive to potential acquirers or investors. Carrying out such a portfolio strategy for a smaller startup has to be performed within the constraint of the concomitant smaller budget, but the summed strength provided by multiple patents covering the startup’s core technology and the flexibility in responding to competitor’s actions provided by having at least one pending patent application can reap dividends upon exit by justifying a higher valuation of the startup.