IP management theory is vital for effective growth strategy

The term 'patent troll' was invented by Peter N Detkin, then an in-house attorney at Intel Corporation. He also made another great discovery: "if you denounce the plaintiff as a patent troll, you can win the suit with a great advantage."

In fact, strong public criticism is directed towards 'non-practising entities' (NPEs), which are defined as “a company or person that gains income, in large part, by licensing patents or claiming patent rights without manufacturing products or supplying services on their own”. Some argue that NPEs should not be allowed to enforce their patent rights. In some cases, judges have given harsher sentences to patent trolls and NPEs.

The question raised by such cases is to what extent can an agent (and a qualified person) be serviceable in planning an IP strategy? Against this background, this report examines the idea of a 'qualified person' from the perspective of management theory, under the theme of the tools required to formulate IP strategy.

In-house attorneys
Detkin was an in-house attorney at Intel Corporation (not an attorney at an external law firm retained by Intel). As will be discussed below, an attorney at a law firm, even a senior partner, cannot employ the tactics used by Detkin, and probably could not have even conceived of them.

What is the purpose of hiring in-house attorneys? Some companies employ in-house attorneys to handle patent protection within their own companies. However, that is not the only reason. In Japanese companies, in-house patent attorneys are employed for the purposes of defence and management. More specifically, patent attorneys may be employed for reasons such as “appropriately coping with lawsuits, if any” or “requiring a suitable manager within the IP department, preferably a qualified person”. They would never be employed for a reason such as “we are planning to aggressively enforce patent rights to make profit”. If this was a reason for employing or assigning a staff member, an unqualified person would be selected. Japanese companies do not employ in-house patent attorneys as prospective members of their management staff or executive team. Although some would consider them appropriate as legislators, patent attorneys and attorneys at law are not seen as suited to executive roles.

Employing a person as a 'non-executive manager' means, in effect, designating that person as a middle manager. This applies not only to those who move from another company, but also to those who qualify while staying at the same company. Once an employee qualifies as a patent attorney, he or she will be regarded as a future manager. At the same time, in Japan today, he or she has little to no chance of becoming president or CEO. Of course, there are exceptions: Kazuhiko Takeda became CEO and Mr Marushima became an executive director of large companies listed on the Tokyo Stock Exchange. However, these are very rare cases.

Some attorneys make a fortune by representing patent trolls, whiles others earn a living representing parties against patent trolls. This is because a defendant can never win – it can only not lose. Indeed, compared to winning, the appraisal of not losing is surprisingly disparate. In essence, there is little chance of in-house attorneys assigned to defence receiving financial recognition.

Intel's strategy
Even though the concept of denouncing a plaintiff as a patent troll to win big may originally have been advocated by Detkin, his tactics to save Intel were not just an idea. Intel's fundamental strategy, as a typical 'shark' company, was first to develop new technologies through R&D and disseminate them, and then to monopolie the technologies through IP rights to gain profit. For this reason, Intel had no sales representatives. Intel specialised in R&D and public relations for integrated circuit chips.

In fact, after sales of Intel's integrated circuit chips inside IBM PCs exploded, Intel excluded other companies from its patent licences, establishing a monopoly. Further, aside from IBM, Intel paid the advertising costs of other PC manufactures in exchange for attaching the 'Intel Inside' logo to their PCs, and expanded its advertising campaign in local languages (eg, 'Intel Haittel' in Japanese). In this manner, PCs equipped with Intel integrated circuit chips have become a global standard and, once Intel integrated circuit chips became equivalent to a PC quality certification, Intel began collecting trademark fees for the Intel Inside logo.

Having worked at Intel, Detkin was well versed in its strategies. Therefore, on coming up with the new idea of patent trolls, he attempted to spread the word. Of course, he could not collect royalties from people who used the term 'patent troll'; however, he must have been imbued with Intel’s strategic frame of mind (ie, “if you make it widely known through PR so as to be a de facto standard, you can win”) and it is perfectly possible that he acted based on this strategy.

As a result of Detkin’s PR activities, journalist Brenda Sandburg used Detkin’s coined term in an article entitled “Trolling for Dollars”. Such an outcome could never have been achieved by an attorney at an external law firm, regardless of the closeness of his or her relationship with the company. It could only be achieved by an in-house attorney or patent attorney versed in the culture and manner of the company.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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