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Patent Litigation and Market Vitality

Is patent litigation detrimental to markets?  Does patent litigation undermine the growth and vitality of a market? 

Believe it or not, extensive patent signifies market vitality–you see patent litigation only in the most lucrative industries in which innovation is rapidly occurring (e.g., mobile-device and semiconductor industries).  If a market is small (e.g., less than US $500M annual revenue) or doesn’t experience rapid advances in technology, you won’t see much patent monetization/litigation.

Take the cleantech industry as a case study—this is a market in its infancy in which startup companies are springing forward, pushing the technological frontier. 

Right now we don’t see many patent lawsuits.  Why?  Because no cleantech technology has significantly penetrated the market, and no cleantech company is earning enough revenue off of a product or service to justify a patent lawsuit.

If we don’t see patent litigation pick up in the cleantech industry, it could mean one of two things: (1) we as a society have found another way to monetize patent assets (I’ll discuss more about this when discussing a patent exchange), or (2) the cleantech industry never grows to experience market penetration (I’m assuming we will see sustained innovation in the industry).

But if we see an increase in patent litigation/monetization, it means the cleantech industry is experiencing market penetration and innovation, and that cleantech companies are earning substantial revenue and are becoming significant market players.

These are all good signs, but the question still remains: would an increase in patent litigation stunt the cleantech industry’s growth, because the cleantech companies themselves would be mired in expensive litigation?

That’s a fair question, but think of it from the other perspective—wouldn’t increased patent litigation and monetization create more opportunities for cleantech companies to earn licensing revenue, to supplement their bottom line?

And wouldn’t cleantech companies themselves be best positioned to monetize IP in the cleantech space?  After all, the cleantech companies are the ones creating the IP and are on the ground floor of the market’s development. 

All-in-all, patent litigation and, monetization more generally, signifies market vitality and innovation, and creates more opportunities for generating licensing revenue. 

Patent litigation and, more generally, monetization are powerful tools—learn to wield and utilize them. 

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