"They own the fundamental patents on how to make an integrated circuit. We’re not going to sue them,” Dave Fullagar, Maxim’s cofounder and VP Engineering said to me.
Dave was explaining to me the facts of life. I was a running Maxim’s interface business at the time, and Texas Instruments had just second sourced the core product in that business (The MAX232).
We had over 13 patents on the various functions in the MAX232, and I wanted us to sue TI because they were violating our patents. Dave, being much wiser and experienced than me, knew better.
Dave knew that TI could countersue us for violating one of their many patents. And Dave also knew that we could spend millions of dollars defending ourselves and likely not get any gain.
And that was my initiation into how a company can use patents at various stages of its life.
When you’re small: Patents are for defense.
Yes, you want to patent your IP if you can when you’re small. And the broader the patents the better.
We had really broad “blocking” patents on the MAX232 that were tough to get around. In fact, our larger competitors didn’t even bother trying to change the design, they just copied our design.
But the patents were extremely valuable to us. Why?
Because we could use the patents to trade to the rights of other patents we might be infringing on.
Dave was right. And that’s what happened. We ended up making deals with other companies for rights to patents we were infringing upon.
That’s the value of patents when your small. The ballgame changes when you’re a big company.
When you’re big: Patents are for offense.
Patents can weaponized when you’re big because you can use your might to stop your competition in its tracks. Let’s say you have a blocking patent like we did on the MAX232. Let’s say a small competitor infringes on that patent.
Then you can force your smaller competitor to one of many advantageous things for you:
A. Cease and desist.
In some cases, you can go to court and force your competitor to stop manufacturing its product. Or…
B. You can cross license.
This is a favorite in the semiconductor industry. I sue and then you sue me. In the end, we end up trading for rights to the other’s patents. Or…
C. You can get royalties.
This was the path we took at Maxim with some of the violators of our patents. We got royalties on every unit they shipped of the stolen IP. Or…
D. You quietly do nothing because there is always someone bigger than you.
This was the position we took with TI. They knew what they were doing, and so did we. But like Sun Tzu said in The Art of War, “Never fight unless you know you’re going to win.”
Remember, patents cost money.
Each country you file a patent in costs you money. The filing fees can range from $1,000 to $11,000 per country, so, it’s very unlikely you’re going to get worldwide patent protection.
Instead, you’ll likely file in the United States and maybe a couple other key countries. Plus…
You’ll need a good patent attorney. And a good patent attorney costs money too. It all adds up for a small startup.
Still, with all the costs involved, you want to patent everything you can think of because the patents will help you play defense and offense when the time is right.
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