Patenting: for and against
New technical solutions are becoming a major factor in economic development and stability of a business in rapidly changing markets. Today, the foundation of the development of any business is to create products of high demand in the face of fierce competition. Unique means of identifying information about competitors, research and developments, legal protection and their potential markets are patent research and patenting of products in general.
Patent research ensures improvement of long-term and short-term planning, identifying the most rational and promising directions of development of a particular area of technology, evaluating the technical level and competitiveness of what has been newly created. We can say that patent research serves as information and analytical support for management decision-making, i.e. this is a tool to solve the problem of competitor assessment, objective definition of the right niche, choice of strategic directions for further development. One good example of the formation and development of patenting and patent study is a branch of LED lighting. The first patents in this area were recorded in the 1990s. Already by the 2000s the annual number of patents in the field of LED lighting (and related areas) amounted to several hundreds. At this time the main research activity was focused in Japan.
Since the 2000s when broad commercial prospects of LED lighting were evident, the number of published patents has increased dramatically. For example, in 2010 about 3,600 patent applications were filed in the world. And about 100 international patent applications and U.S. applications were published in one day (26 January 2012). Thus, in 2013 the leader of the “LED race” became the United States. In the 2000s a pool was created by the new major LED technology patent owners- Nichia, Toyota Gosei, Philips, Osram, Cree, Seoul Semiconductors. It should be noted that by 2013 the situation has developed in such a way that 80-90% of all LED industry patents were owned by European, Japanese and American companies. Relationships between these leaders were uneasy. During 2000-2008 there were about 30 lawsuits between them. But in general we can say that the LED industry has moved along the evolutionary rather than revolutionary path - the path of entering into cross- licensing agreements between all “LED pool” parties. This policy has enabled leading companies to erect barriers for new players to enter the market, and the “pool” participants themselves to focus on developing of the new products. Figure 1 shows a “map” of the major agreements and patent disputes between the main players of the LED industry in 2013 (according to the research agency, Memoori Business Intelligence Ltd.).
Leading players in the LED market are quite successful in defending themselves. In recent years only several new players managed to get into the list of leaders. They were Bridglelux, Samsung, LG companies. Nevertheless, the assault of third party manufacturers is becoming more serious, and that means number of patent disputes is growing too. The pressure from Southeast Asian companies, primarily Chinese ones, is increasing. To solely overcome the patent barrier is costly, so companies are combining their efforts in the so-called LED industry alliances.
On August 30, 2012 a number of Chinese LED companies announced the formation of a patent pool. By joint efforts Chinese companies hope to avoid the devastating effects of patent disputes. Sometimes patent disputes in a particular industry have side effects: they give serious blows to related industries. The LED industry is not an exception. Most recently, a trial between Osram on the one side and Samsung and LG on the other side had almost stopped the sales of BMW and Audi in South Korea since both automakers have used Osram LED products (http://awapatent.com). In Russia the “patent shield” in LED lighting is at its formative stage. The Russian peculiarity lies in the fact that the vast majority of Russian manufacturers base assembly on imported components, including LEDs. Therefore, the bulk of Russian patents are model patents protecting fixtures and lamps design, as well as various technical solutions (for example, a lighting fixtures control system). Prior to 2008, interest in the LED category was weak . For example, in 2005-2008 only about 60 patents in the field of LED lighting fixtures and lamps were published. However, with the adoption of the Federal Law “On Energy Saving” in 2009 the situation has changed, and in 2009-2011the number of published patents was close to 200- which is a quite modest figure by world standards.
Today, most of the Russian LED lighting fixtures manufacturers do not pay enough attention to patent protection of their developments. Basically, it certainly says something about the level of development itself- but in many ways also the attitude to patent protection. Only few Russian lighting companies can claim proper protection. “Usually patent portfolios of even major LED lighting systems manufacturers consist of one to three patents”, Says Elena Filatova, Development Deputy Director at LLC AtomSvet.
- In 2009, after our company obtained its first patents, the management faced a classic dilemma: to remain in the area of research and development and sell new technology or to move into a completely new area for the management company and become a production company creating a new venture and bringing innovative new products to market. In the classic version each project undergoes a cycle of “science - production-consumption”. An innovative product idea must have a basis in the form of scientific and marketing research; production must adapt to the customer and be based on scientific research. As a result, today we own a number of assets in the form of intellectual property ranging from practical models and industrial designs to the registered trademarks. Moreover, it is not only about the Russian market. Today the situation with patent disputes is changing rapidly. They are becoming a reality of the Russian LED industry. For example, according to data released by RosPravosudie, the largest data base of lawyers and attorneys, on June 13, 2013 the Arbitration Court of Tatarstan Republic granted the petition of one of the leading Russian LED systems manufacturers, the Ledel company, on patent #87598 infringement “LED Ceiling Lighting Fixture” and prohibited the defendant to sell fixtures infringing Ledel’s patent. Current development trends in the Russian LED lighting system market show that in the near future the importance of patent protection in the development of the Russian LED industry will increase dramatically. “The overall thrust of patent research is changing. Patent research is the market analysis of lighting products in order to ensure its competitiveness, - continues Elena Filatova. - We carry out patent activities at all stages of the AtomSvet product life cycle: from the design specification requirements (during R & D) to the commercial marketing in both domestic and overseas markets. Patent activities as one of the components of a civilized lighting system market, allow the current consumer demands for products to be outlined, market trends to be analyzed, the most important scientific and technical solutions to be identified, but most importantly the possibility of entering the market with the products of a particular country to be determined (what is meant here is evaluation as to novelty). If we want to develop rapidly due attention needs to be paid to research. However, each patent must have a commercial effect. The ability to protect new technical solutions with a patent (its patentability) does not always lead to the creation of technology or product with commercial value. Prior to filing a patent application one must objectively evaluate the pros and cons of patenting, and analyze possible alternatives.
Preparation, maintenance of patents and the protection of patent rights may be costly and not carry sufficient economic effect. Applying for a patent or not is definitely a business decision. It should be based mainly on the economic advantage of obtaining protection for the new technology that provides significant benefits resulting from its commercialization.
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