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Patents, like castles, are easier to defend when properly constructed, expert says

By Hank Schultz , 03-Mar-2014

Patents, like castles, are easier to defend when properly constructed, expert says

Patent enforcement has become more of a hot button issue in the dietary supplement realm for a number of reasons. Companies are gaining a deeper appreciation of how a strong intellectual property portfolio can both add to their bottom line and to the potential value of the company as an acquisition target. And companies are starting to see, too, how important it is for subsequent defense that the patent be writing properly in the first place.

“For many years in the dietary supplement market companies weren’t investing much in IP,” Kevin Bell, an attorney in the firm Patton Boggs told NutraIngredients-USA. “If they did have patents you didn’t see a lot of enforcement of those patents.  But in the past seven to 10 years there has been a significant uptick in lawsuits.”

Bell said acquiring IP and defending it is part of the maturation of the sector.  Companies that owned certain niches in the past now find themselves rubbing elbows with new players.

“It’s another way to address competition in the market for companies that didn’t have a lot of competition in the past,” he said.

Legitimate disputes vs the patent trolls

The concept of IP enforcement acquired new visibility in recent months with the announcement of the end of the so-called krill wars with the various agreements between krill oil supplier Neptune on the one side with its competitors : Aker BioMarine, Enzymotec and Rimfrost.  Bell cited this case an example of a legitimate patent dispute, with real companies on both sides with individual points of view. Another company that, like Neptune, has vigorously defending its IP in the past is ingredient supplier Sabinsa Corporation; for a discussion of that company’s view of the state of patent enforcement, click here .

Bell was quick to point out the difference between those situations and the so-called patent trolls, whose activites are another reason why patent suits have ramped up. These are companies whose only stock-in-trade seems to be to file infringment lawsuits on IP which they either own or have licensed. Chief among these non practicing entitites (NPEs) are Thermolife and Tawnsaura. 

Defending patents can be expensive.  According to the American Intellectual Property Owners Association , costs can range from about $1 million on the low end up to as much as $6 million in cases where $25 million or more is at risk. This cost has led some companies to seek patents in situations in which they know do not have enough cash to defend them.  One common reason given for taking this approach is that it reassures customers that some other company’s patent is not being infringed upon.

Bell said he's not sure that’s a valid reason for getting a patent if that is the only goal in mind.

“Just because you have a product that is covered by a patent doesn’t mean you aren’t infringing on someone else’s patent,” Bell said.  He cited Apple and its iPhone as a theoretical example. Apple might have dozens of patents on various features of the product, but there could be hundreds more out there held by other companies that might apply to some aspect of the device.

Better patents

That’s why getting the best advice in crafting the patent’s language is critical, Bell said.  Much of the nitty-gritty of infringement lawsuits has to do with the wording of the actual claims. Seemingly innocuous words, when left undefined, can cause big headaches down the road.

Let’s say there is a dispute over the word ‘substantially.’ One side might say that means 50%.  The other side might say that means 70%,” he said. “Historically, a lot of the patent applications that were pursued could have been better.  Getting a patent isn’t cheap so it pays to do it right. You have to invest in the right people, the right expertise, for your market so that you end up with patent claims that actually capture the nature of the invention.

“It’s kind of like a deed to property. This is my back yard it turns out I could have put my fence over six more feet if I’d defined that deed more carefully. And it's kind of like putting a castle and a moat around your product,” Bell said.

Acquisition value

Bell said companies are increasingly aware of how well-crafted and vigorously defended IP adds the company’s overall value. As the supplement space matures, so too does the sophistication of companies looking to buy into the category.

“I believe when it comes to getting patents and owning them, that is money well spent,” he said. “You often see this on the pharmaceutical side of life.  You are starting to see better corporate governance among dietary supplement companies regarding IP because they are starting to see pharmaceutical companies acquiring companies in the space and the strength of the IP portfolio is one of the things they look at,” he said.

“It makes good sense for dietary supplement companies to do everything they can to protect their IP,” Bell said.