Thursday, July 16, 2015

Patent Strategy under Legal Uncertainty

I. Strategy under uncertainty

In “Strategy under Uncertainty” (Harvard Business Review Nov. - Dec. 1997 Issue), the authors insisted that the traditional approach to strategy cannot apply to the uncertain business environments because the predictable outcomes are the presumption of the traditional strategy development. The authors of “Strategy under Uncertainty” identified four levels of business uncertainty and provided the frameworks for developing strategy according to the level of uncertainty:

Level one (clear enough future): The precise prediction of the future is possible, and thus, the traditional approach to strategy development is applicable.

Level two (alternative futures): A few potential outcomes can be predictable, and thus, the traditional approach to strategy development is applicable for each scenario that explains the potential future outcomes.

Level three (range of futures): A spectrum of potential futures can be identified, and thus, the traditional approach to strategy development is not applicable because any potential outcome may lie anywhere within the range of the spectrum.

Level four (true ambiguity): Any prediction of the future is impossible, which is quite rare situation.

II. Legal uncertainty in the patent system

Recent rapid changes in legal environment surrounding the patent system cause extensive legal uncertainties. Almost all of the players in the patent system contribute to the formation of the current legal uncertainties:

Judicial Uncertainty: Recent Supreme Court decisions’ flexibility principle has driven the legal uncertainty in the interpretation of the patent laws, rather than providing the “bright line rules.” The Alice v. CLS Bank decision regarding patent-eligibility has caused a huge concern regarding the future of software patents.

Legislative Uncertainty: Represented by the “Innovation Act” and the “Patent Act,” the Congress is now driving new bills to reform the patent system. The anti-patent rights characteristic of the new bills has made a doubt regarding the enforceability of the legitimate patent rights.

Administrative Uncertainty: Invalidation through the PTAB’s post grant review procedures has given rise to a question regarding a patent as the property rights.

Statutory Uncertainty: Newly adopted "first-to-file" system in the “America Invents Act (AIA)” caused the AIA rewrote several essential terms in the 35 U.S.C., and thus, the uncertainty of how the USPTO and courts will interpret and apply the AIA.

III. Patent strategy development under legal uncertainty

Risk aversion is the typical characteristic of a person. According to the explanation of the WIKIPEDIA, risk aversion is “the reluctance of a person to accept a bargain with an uncertain payoff rather than another bargain with a more certain, but possibly lower, expected payoff.” Thus, considering the fact that patent strategy is developed mostly by the risk adverse lawyers traditionally, the “wait and see” and “go just in time” are the natural choice of patent strategy subject to current legal uncertainties.

However, in “The Attacker’s Advantage: Turning Uncertainty Into Breakthrough Opportunities," the author said that intelligent risk takers are the true winners of the business world of uncertainty. According to the “Strategy under Uncertainty,” the legal uncertainties in the current patent system can be classified as the level two uncertainty, and thus, a few potential outcomes can be predictable for each identified legal uncertainty. Thus, the traditional approach to strategy development is applicable for the specific objectives (creating new patent portfolios, enforcement against competitors or exploitation for monetization etc.), once scenarios that explain the potential future outcomes are developed (for an example of patent strategy development methodology, please see “Forecasting & Strategy Development for Post-Smartphone (Wearables & IoT Devices) Patent Wars”

For details regarding the patent strategy development under legal uncertainty, please contact Alex G. Lee (

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