Patent Law

A press releaseappeared today, August 4, 2009, at PR Newswire that really caught my eye.  The article describes the importance of considering patent value in lending decisions and in potentially avoiding bankruptcy.

I was retainedby a public company several years ago to explore their industry for potential infringers of the patent that formed the foundation for their financial software.  The software offered them a competitive advantage and through our research we identified several companies that appeared to have potentially infringing products.  Before we could expand our research the company filed for bankruptcy and was liquidated.  I approached counsel for the trustee, but was unsuccessful in getting their interest in exploring further the potential income stream that might be derived from the patent.  I believe this was a tremendous lost opportunity and may in large part be due to lack of focus on the asset value of patents in bankruptcy.

Here is the press release:

Economic experts expect up to 35,000 business failures in Germany in 2009. Intangible assets such as patents are not sufficiently taken into account by many banks when making lending decisions. This is proved by a new study by the KfW banking group."A misjudgement which can cost companies their existence. Active patent management is essential to ensure it does not come to this and this is especially true in times of economic crisis," says Daniel Papst, Patent Attorney at Papst Licensing GmbH & Co. KG. "Successful patent exploitation can prevent bankruptcy."

For this reason, SMEs should no longer regard intellectual property rights merely as an instrument to block competitors, rather they must view them as a core element of an "offensive corporate strategy" - for example, in order to tap into new markets. "In doing so, they require assistance. Particularly if there is a risk of inability to make payments due to patent infringements, it is vital to take early action," continues Papst. The expert in patent exploitation knows exactly what he is talking about.

His father's company, Papst Motoren, was subject to wide-scale patent infringements. In the 1980s, competitors, above all in Asia, began to illegally copy the patented drive motors of Papst Motoren GmbH & Co. KG and dump them on the world market. The founder Georg Papst did not think that he was in a position to be able to effectively proceed against the infringements of his patents. In 1992, the house banks cancelled the line of credit and Georg Papst had to sell his company. He invested the revenue from the sale, at high risk, in buying back the around 600 patents and patent applications in order to prosecute the infringements of them. He founded Papst Licensing GmbH & Co. KG, bought the products of the infringers and examined them. If he were able to ascertain patent infringement, he would call in licence fees from the patent infringers. It was a David against Goliath battle. The patent-infringing companies thought that they could sit out the problem and that Georg Papst would run out of funds. However, he stuck to his guns and took the case to court where necessary. This resulted in more than 140 licensing agreements with many well-known companies in the IT and electronics sectors.

Today, Papst Licensing GmbH & Co. KG offers companies professional prosecution services in the event of patent infringements. The aim is always to agree a licensing agreement with patent infringers. "Particularly in the case of companies facing bankruptcy, there is the risk that key patents will be simply sold as fast as possible, instead of putting the company on a more stable footing as a result of licence income generated at an early stage," concluded Papst.