By: Of Counsel Mark Bloomberg

Successfully bringing a new quantum product to market presents a number of challenges.  First, you have to create the product.  Second, there must be demand for that product in the market.  Third, you have to compete with others in that market.  And, fourth, you have to produce a reliable product, at a reasonable cost, to be attractive to that market, yet still allow for a profit margin.  All of that is difficult enough.  But one final obstacle remains – the patent rights hurdle.

Patent rights can a blessing, and they can also be a curse.  To understand why, it is critical to understand that patents do not give the patent owner – or anyone else – the right to do anything.  Rather, they give the patent owner the right to exclude others from doing what is spelled out in the claims of the patent.

Seen in this light, a patent can be a blessing for the patent owner.  The owner can exclude others from using its claimed invention.  The owner can allow others to use its invention, but only after payment of a royalty.  The owner can cross-license its patent to another patent owner who, in return, cross-licenses its patent, so the two patent owners – but no one else – can market the product.  Given the value of patent rights, they are often an important factor in valuing the company that owns those rights should that company plan to be a target of acquisition or receive an unsolicited offer to be acquired.

On the other hand, patents can be a curse when owned by a competitor because of the exclusionary rights they provide.

Given the value of patent rights, it is fundamentally important for companies introducing new quantum products to understand three basic things:  (1) what should they patent; (2) who owns the patent rights to the products they develop; and (3) how might the patent rights of others impact those products.  Some competitors in the quantum industry are large technology companies with staff already in place to grapple with these issues.  Patent issues relating to quantum products can still present challenges, but those challenges are nothing different from what those companies face every day.

In contrast, many competitors are new, small companies that have not faced these issues before, and have limited time, personnel and resources to address them.  They may find themselves walking through a minefield blindfolded.  They should try to think about the following things.

What should be patented?  Not every new product design can be patented.  Among other things, a design must be new and different from what came before.  Depending upon how close it is to that “prior art,” the claims of the resulting patent may be broad, or they may be narrow.

That does not end the inquiry about whether to seek at patent.  Just because an invention can be patented, does not mean the expense of obtaining a patent is justified.  The sad truth is most patents find themselves in the scrapheap of innovations that have no commercial use or application.  Deciding what to patent can often be like gazing into a crystal ball.  On the front end, it will likely take at least two years for a patent to issue, before which time it has no effect.  On the back end, this is a rapidly evolving area of technology, and today’s innovations rapidly become obsolete.  So deciding whether to patent an innovation in a world of limited resources requires making a “best guess” about whether the innovation is likely to be commercially valuable 2-7 years from now, thus warranting patent protection.

Who owns the patent rights?  Under United States patent law, a patent is initially owned by the inventor or inventors.  In this regard, it does not matter which inventors contributed more to the invention and which inventors contributed less – they all have equal shares.  Inventors typically assign their inventions to their employer, but that is a matter of contractual agreement with the employer, not a matter of patent law.  It is therefore critical that each company have in place an agreement that plainly assigns its employees’ ownership rights to patents to the company.

The question of ownership is even more complicated when the inventors are employed by different entities, which is often the case in this field, where different companies frequently collaborate on technical innovation.  In the first instance, of course, the inventors own the patent.  But if they assign their rights to their respective employers, the patent will be owned by two separate companies, each of which will have the same rights in the invention.  As a result, each owner will effectively lose control of the patent – either owner can license someone else to use the patented invention without approval of the other, and a shrewd competitor could create a bidding war between the owners that might drive the royalty for a license to nearly zero.

It is thus critical to ensure that all patent rights are owned by a single entity.  And this should be done in advance because it can be difficult to reach agreement about ownership of rights after a successful product is launched and people have dollar signs in their eyes.

What can be done about others’ patent rights?  Someone else’s patent can stop a new product in its tracks.  Even if a claim for infringement can be defeated, the time and expense of defending patent litigation can itself be devastating.  And, if the patent owner prevails, it may be able to obtain an injunction against infringement, or at least a royalty that may render the new product commercial unviable.

The first problem is identifying potentially relevant patents in advance so something can be done about them.  Perhaps they are well known; perhaps they are asserted in correspondence from the patent owner; perhaps they are identified in a search of patents.  But that still may not be enough.  New patents – which cannot be known in advance of their issuance – continually appear, especially in technical areas like quantum computing where research and innovation are robust.

When a potentially relevant patent is identified, a number of actions can be taken.  First, it may be determined that the patent does not cover the product.  If, however, the patent appears to cover the product, or that question is close, it may be possible to modify the product in a way that plainly does not infringe – a process called “designing around the patent.”  The design around product may even result in “better mousetrap” than the original product.  Another alternative is to obtain a license from the patent owner, but that may be prohibitively expensive, even if the patent owner is willing to grant a license.  Finally, if the patent was improperly issued because of prior art, it is possible to challenge the validity of the patent in the Patent Office, but that process comes with expense and the uncertainty of what will happen at the end of the year the Patent Office will take to decide.

Unfortunately, patent rights create yet another challenge, and potential pitfall in the already difficult path of commercializing a new quantum product.  It is essential that patent issues be considered, but they must be addressed in a way that is consistent with the resources and business goals of the company creating the new quantum product.