New technology companies need an intellectual property strategy

March 1, 2008
Companies often leverage their research efforts by partnering with universities, private research groups, venture capitalists, and other industry partners.
Spectraseis applies proprietary geophysical technologies both on shore and subsea to help oil and gas companies reduce risk and more efficiently find and produce hydrocarbon reserves.
Click here to enlarge image

Companies often leverage their research efforts by partnering with universities, private research groups, venture capitalists, and other industry partners. A strategic patent plan is integral to maintaining control of intellectual property.

David Walker, Spectraseis Zurich, Switzerland

Perhaps the only asset more difficult to find than new hydrocarbon reservoirs is new exploration technology for finding those reservoirs. Development of new exploration technologies requires considerable investment capital that, in turn, requires an intellectual property strategy demonstrating that the new technology provides a competitive advantage in the market, for raising capital and with potential buyers. The goal of the IP management program is the control of unique IP for the exclusive benefit of the company. A strategic patent plan is integral to control of IP.

Consider the case for a new exploration technology company in the oil industry. Often, such a company initially obtains a license for a promising technology from a university or other entity and then proceeds to enhance and market this technology in conjunction with the company’s own research and patent development program. The new technology company may even leverage its research efforts by financially sponsoring research with major universities or private research firms that result in patent rights owned by the company. Eventually, the new exploration technology company will seek to partner with a venture capital firm or large industry partner enabling the company to accelerate its research, development, and marketing.

An example of a new technology company successfully following this route is Spectraseis, a Zürich, Switzerland-based technology company that researches and applies proprietary geophysical technologies to help oil and gas companies reduce risk and more efficiently find and produce hydrocarbon reserves. Spectraseis provides technology and services in the fast-emerging field of low-frequency passive seismic surveys.

Spectraseis initially acquired all existing intellectual property rights that were available for their technology, including licenses and research agreements from the University of Zürich, when the company was founded in 2003. Spectraseis currently sponsors a strong research team with another university, ETH-Zürich, comprised of seven researchers under an agreement that assigns intellectual property rights to the company. The ETH-Zürich research team collaborates with Spectraseis’ own technical staff to improve and enhance low frequency hydrocarbon detection methods using seismic data Spectraseis acquires around the world. Spectraseis is transforming from an R&D focused start-up to an oil industry commercial services provider and recently raised significant capital in order to accelerate its business development.

Spectraseis intellectual property advantage relies on patents, trade secrets, and rapidly developing the technology to maintain their leadership position for low-frequency research and development. Spectraseis favors patent filing in the balance between patents and trade secrets for two reasons. First, patent filing ensures control of the inventive concepts while allowing for the cooperative sharing of information with clients, which in turn leads to further advances in the technology. The second reason is that the upstream oil industry avoids ‘black box’ methodologies. The Spectraseis business plan calls for bringing the technology to market quickly, so slow uptake is not an option.

An intellectual property strategy built around a strong patent portfolio providing competitive advantage in an important new technology is extremely attractive to prospective investors. However, a single patent family may have associated fees that can be upwards of US$400,000 over the effective lifetime of a patent, not to mention the mandatory up-front overhead for patent application preparation work by expert legal counsel. With this necessary investment of company resources and legal expertise, a comprehensive portfolio development strategy – the strategic patent plan – becomes an integral part the company’s evolving business plan.

The strategic patent plan

The company’s business plan guides the strategic patent plan. The process enables identification of deficiencies in intellectual property coverage and enables effective responses for potentially troublesome blocking patents inhibiting the exploitation of the company’s technology or that may otherwise affect or block research, development, or marketing of products or services. The strategic plan also includes evaluating technologies and the technology needs of competitors, partners, and customers.

Any identified intellectual property deficiencies may be filled through licensing or covered through the company’s research and patenting program. Any identified third-party problem patents can also be addressed through licensing, “engineering around” the problem claims, or other legal strategies.

Another beneficial aspect is identifying improvements to add to the company’s patents and patent applications. Spectraseis continuously reviews patent application status in view of current research program activity. Although the total number of research and development personnel is not large, Spectraseis files new patent applications, continuation-in-part applications or amendments to previous applications at least twice a month.

The strategic patent plan defines specific categories of technologies starting with core products and services to be protected. Patents for these core competencies will be pursued with the most urgency. With respect to less critical technology the company may file a limited number of “defensive” patent applications while remembering that a patent is an offensive right, meaning it is a right to prohibit a third-party from making, using or selling the patented invention. Patent ownership in itself does not assure the patent owner’s right to practice the invention, as practicing the patent may infringe a third-party patent right.

Click here to enlarge image

The strategic patent plan sets decision criteria for each juncture in the patent application process. For example, once an invention has been identified and selected for a patent application, several factors are considered to determine whether to file a provisional or utility application in the United States, a PCT International Application for Patent and before filing counterpart applications in multiple foreign jurisdictions. These factors include cost, timing, and resource availability combined with the expected importance of the invention to the company business plan. The relevance and utility of the patent family to the overall business strategy is reviewed as milestones occur in the patent application process.

For new technology companies, a very thorough prior art search and analysis is a necessity. While it is not uncommon for patent strategy advisors to recommend a cursory prior art search, a new technology company will eventually have to face any relevant art that exists. Investors will insist on thorough due diligence on the company’s technology, and so scrutiny of all intellectual property issues across the board is inevitable.

Prior art issues are certainly less expensive to address sooner rather than later. Spectraseis, for example, thoroughly researched the prior art during the founding of the company to survey all similar technology, accelerate the research program, and point out potential collaborators and competitors. This provided Spectraseis significant development cost savings as well aided goal definition during the initial research efforts.

Prior art reviews will very often lead to acquiring one or more “freedom-to-operate” opinions written in view of third-party technologies. Third-party patent rights that could be infringed by the company employing the technology should be identified and analyzed. Sometimes these freedom-to-operate analyses are delayed to reduce expenses but the search and review of third-party patents is not great compared with the costs incurred just to initiate a defense to a patent infringement suit.

Outside intellectual property counsel usually conduct due diligence for their clients using standard checklists that may not be appropriate for a new technology company. Because a checklist is not a substitute for a strategy the management team needs to evaluate these checklists with the business plan in mind. Additionally, patent application file histories analysis may be reduced to a checklist format for important formalities, but identifying potential technical issues within application filings is necessarily a combination of legal and technical analysis that must be performed with combined legal and technical expertise.

Continuous adherence to the IP management program adds marginally to Spectraseis’ legal costs. At the same time, the analysis provides Spectraseis’ management team an up-to-date view of the value of the company’s intellectual property position enabling rational pricing of services, licensing, and investment opportunities. These upfront costs, management time and effort may initially appear to be expensive, especially using costly startup resources, but will more than payoff in future added value and time savings later when the technology company is rapidly growing.

The strategic role of patent counsel

The strategic role of patent counsel includes identifying patentable inventions, assisting with patent litigation, and analyzing/responding to notice letters, evaluating the patent portfolios of the company and competitors. Other responsibilities include educating management and technical staff on patent issues. A new technology company may require patent counsel to be a technical expert or to become technically expert in the company’s technology.

The patent attorney’s role as technical expert is critically important when seeking to obtain the broadest novel, and therefore strongest, patent claims. The patent attorney drafting the claims needs to understand exactly what is novel about the invention in the context of how and where the invention fits into the technology field. While technical staffs are perfectly capable of telling anyone exactly what novel invention feature should be protected, drafting the patent application disclosure and claims to obtain the optimum scope of protection is an art even when the claims drafter thoroughly understands the underlying technology.

Not all patent attorneys are equally adept at analyzing all aspects of an intellectual property portfolio, particularly when the technology is in a specialized technical area. Patent attorneys who are technically competent experts in the company’s technology are best able to evaluate patent scope and effectiveness. However, because most patent attorneys are effectively generalists, management needs to carefully and independently evaluate their patent counsel for technical competence in the company’s technology.

Patent attorneys possessing an expert’s knowledge in particular art areas, for example, geophysical data acquisition and signal processing or petrophysical instrumentation and data analysis for downhole tools are uncommon. The necessary alternative to having access to technically expert patent attorneys is supplying expensive resources, in terms of personnel time, money or both, to thoroughly educate the attorneys in the company technology.

Patent portfolio analyses are required not only for the new technology company, but also for the competitors’ portfolios. To determine the scope, potential effectiveness and value of any patent portfolio, legal analysis and technical analysis must be performed together. Too often the legal analyst will not understand the technical details of the intellectual property, but nevertheless performs both functions, which could easily result in a flawed analysis of the effective protection afforded by the patents reviewed. Likewise, cursory readings of any patent abstracts and claims by company management and technical staff will in most cases be insufficient to determine whether the legal protection afforded by the reviewed patents will be effective.

Patent disclosures are potential litigation documents and therefore are written for that purpose, often to the detriment of ease of reading. Because patents are written in a pedantic style with what often seems unnecessarily obtuse phrasing, technical staff often find them irritating or tiresome to review. The most cost-effective approach to enable adequate patent portfolio reviews is to employ patent counsel expert in the technology to directly interface with the company’s technical staff.


Acquiring the capital investment required to develop new technology depends on demonstrating control of unique IP for the exclusive benefit of the company. The technology company’s continuous IP management program informs the company’s intellectual property strategy as well as ensuring that a potential investor’s vetting process is rapid. In addition to assisting the management team, a patent counsel expert in the company’s technology adds value by ensuring that both legal analysis and technical analysis are properly combined for the entire intellectual property portfolio, including the strategic patent plan.

Spectraseis has successfully executed the many tasks necessary to develop the market and enhance a new risk reduction technology for their clients. As the Spectraseis experience illustrates, attention to a continuous IP management strategy will be returned many times over.

About the author

Click here to enlarge image

David Walker [[email protected]] is intellectual property counsel at Spectraseis in Zurich, Switzerland. Walker graduated with a master’s degree from the University of Wyoming and worked as a geophysicist for 11 years for Western Geophysical and Phillips Petroleum Co. He obtained a JD from the University of Houston and has practiced as a US patent attorney focusing on geophysical and related technologies. Walker is editor of the intellectual property department of Geophysics, a journal of the Society of Exploration Geophysics.