International patents: Be careful what you wish (and pay) for

By Dan Harris

At least once a week one of our international manufacturing lawyers will get an email that starts with something like the following:

We just wrapped up the patent on our newest product and we are now ready to start shopping around for getting it manufactured overseas. Is there anything else I need to protect that product from being copied?

Because what’s done is done, we virtually never tell the company that the huge sums it has already spent on its patent may have been completely wasted or at least could have been far better spent elsewhere, because what’s the point in trying to get someone to cry over spilled milk? But guess what? In most cases it probably was.

There is a massive and unfounded love for patents by American companies. I see this as an historical remnant from when the U.S. economy was far more domestic and far more focused on industrial as opposed to consumer goods. Those days are over and so people need to just stop it with their OTT patent love. Just to be perfectly clear, I am NOT saying patents never make sense, because they obviously do. What I am saying is that they are being bought and paid for far too often by companies on the international stage and these expenditures often actually weaken IP protection.

How can getting a patent weaken IP protection?

Let me explain…..

Patents are expensive. I know I keep saying that but that is because it is important to realize that. If you are a big company that can afford to spend for every single thing you need to protect your IP, you can stop reading now. This post is intended for the 99% of companies that need to make budget choices even on how they will protect their IP. Truth is there are countless things a company can do to protect its IP, including the following:

1. Patents. In every country in which it might have its product manufactured or sold.
2. Copyrights. In every country in which it might have its product manufactured or sold.
3. Trademarks. In every country in which it might have its product manufactured or sold.
4. NNN Agreements, with every person or company to which you might reveal confidential information.
5. Mold and Tooling Ownership and usage agreements, with every company that will be making your product.
6. Product Development Agreements, with every company with whom you work on developing or even refining your product.
7. Manufacturing Agreements with those companies that will be manufacturing your product.
8. Non Compete Agreements with your employees, your suppliers, your vendors, and others.
9. Trade Secret Agreements with your employees, your suppliers, your vendors, and others.
10. Constant Monitoring of the Internet and the physical world for counterfeit or infringing products. See Getting Counterfeits off Alibaba: Anger is NOT a Strategy.
11. Take down letters and cease and desist letters to stop the selling of counterfeit or infringing products.
12. Raids against counterfeiters. We will be writing more about these in the next few weeks.
13. Litigation.
14. Administrative actions.
15. Police assistance.

I could go on and on. The whole point of the above is that there are countless possible weapons in an IP protection arsenal and the best ones for your business are the best ones for your business. See How NOT to Lose Your Shirt When Having Your Product Made Overseas, Part 3: What Makes Sense for you is What Makes Sense for YOU. What this really means is that the last thing you should do is focus on one thing (like a U.S. patent) and only after you get that go out seeking expert advice for what you need to protect your IP.

Why then with the multitude of choices am I being so tough on patents? Two reasons. One, they are really expensive to get. Figure around $15,000. But hey, you are probably thinking that this might be worth it to get the gold standard in IP protection and you might be right in some cases. But here’s the other dirty little secret about patents: They usually cost a small fortune to enforce. There are truly few things more expensive than patent litigation. In 2017, the median overall cost for a patent infringement case with $1 million to $10 million at stake was $1.7 million, according to the American Intellectual Property Law Association’s “2017 Report of the Economic Survey.” People, that’s the median for what are relatively small patent litigation matters. When you spent $15,000 on your patent, did anyone tell you that enforcing it would likely easily cost you more than a million dollars? Would you have paid for that patent had you known that? Did anyone tell you that patent protection essentially ends at the Canadian and Mexican borders? Would you have spent $15,000 on your patent had you known this? Again, I am not saying patents do not have their time and their place but I am saying that people need to stop viewing them as IP panaceas.

But wait, you may be saying, I got this patent not to sue those who violate it but to be able to get any product that infringes on my patent removed from the online marketplace on which it is being sold. In China and Worldwide: Trademarks Good, Patents Bad we explained why the “lowly” and inexpensive trademark can be so much better than a patent, especially when it comes to online marketplaces:

Bottom Line: Do not on your own or with the help of the Internet decide what IP protection makes sense for your international business and then pay for something. Anything. Your better course of action is work with a qualified IP professional with international expertise to map out a protection plan that makes sense for you based on your needs and your short and long term budget.

Dan Harris is founder of the Harris Bricken law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes ChinaLawBlog.com as a source of China legal and business information.