Business Exposed150
organization and their ability vanishes with
the severance of the social ties.
This means that we probably all over-
estimate the portability of our star workers,
and of ourselves. . . .
It also means we pay them too much.
Patent sharks
Another way in which companies try to protect and hold on to
their exclusive knowledge is through patents. And that is where
the patent sharks come in. You never heard of patent sharks?!
You’re kidding, right? OK, I’ll admit it, I had never heard of them
either. But they sound pretty scary, right? Well . . . OK, perhaps not;
the word “patent” sort of seems to take the edge out of the word
“shark” a bit. Yet, now that I have learned more about them, I
have to admit, I am starting to believe that they should send some
shivers down your corporate spine; they really are quite creepy.
My colleague at the London Business School, Markus Reitzig, has
been studying patent sharks at length. I always found IP (intel-
lectual property) a bit of a bore when it comes to research topics
but, admittedly, his research did remind me of Jaws III, but with
briefcase, pin-striped suit and, importantly, a mob of solicitors to
accompany him. Let me explain.
As you may know, when it comes to the effectiveness of
patents, pharmaceuticals are an exception. In most industries,
patents provide only very limited protection against imitation
by competitors. Usually, the part of the product that is patent-
“protected” can be substituted or “invented around”. Therefore,
what rms have started doing is to protect their products with
as many patents as possible. So, it is not uncommon in some
high-tech industries to have over 1,000 different patents to
protect many little components in a rm’s product. They gure,
one of them may not do the trick but if you have a whole bunch
of them, collectively they should give some protection.
‘‘
we probably all
overestimate the
portability of our
star workers, and of
ourselves . . .
’’
1516
n
Myths in management
Yet, since competitors do the same, as a result, researchers have
long noticed that patents have become sort of a corporate
currency. How does this work? Well, whatever you want to do, in
terms of developing a new product or technology, you’re bound
to infringe on someone’s patent. Luckily, that someone is likely
to need to infringe on some of your patents too. Rather than
going to court, rms usually strike a deal: “I will forgive you
for infringing on these 84 patents if you just absolve me from
infringing on 63 of yours”. And this system generally works quite
well.
However, given the plethora of patents in such industries, the
difculty is that you seldom know in advance exactly which
patents you will be infringing on; there are just too many of
them lying around. What has now happened is that some
specialized rms – the infamous “patent sharks” – have started
taking advantage of this. They acquire patents not with the
intention of using them, but with the aim to extort money from
the unknowing infringers.
When a patent shark nds out that a certain rm is using a
technology which more or less falls under one of its patents,
it waits patiently until that rm has fully committed itself
to the technology (and has incorporated it in its products,
marketed them, made additional investments, etc.). Then the
shark surfaces . . .
It will demand large sums of money for the infringement. If the
rm refuses, they will roar “court action!” and threaten to shut
them down. And the nice thing – at least, for the shark – is that
the patent doesn’t even have to be a really good one. Even if it
is only a half-decent patent, with little chance of holding up in
court, they can often convince a judge to issue an injunction,
forcing the rm to suspend business pending the court’s decision.
And this can be so potentially disastrous for the rm that it
quickly coughs up the dough to make the shark go away.
For example, NTP, a pure patent-holding company, led a suit
against RIM, the producer of the best-selling BlackBerry. RIM
was condent that the ve patents NTP was throwing at them
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