An interesting patent strategy article came across my Google Scholar feed today entitled “The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Market” which is set to be presented at the 2013 Druid Conference on Innovation, Strategy & Entrepreneurship.
Although fairly high level, it talks about how firm strategy shifts when strong intellectual property is seen in the business ecosystem. Using the Smartphone as a model, the authors show that the market shares of Google’s Android phones grow faster in markets and countries with weak intellectual property rights protection as a result of escalated patent wars.
This paper is of interest because it unknowingly addresses the business issue of how firms need to adapt to play in high growth industries, where the speed of product development is greatly outpaced by the speed of the patent office. For startups and SME’s that need to find market share while navigating the patent portfolio of the industry incumbents, this provides a valuable point to bring to the board room table for discussion. By focusing a new entrants first beachhead on markets that have weaker patent protection they can both gain a new customer base and also delay entry into stronger patent protected markets until the firm’s own patent portfolio has been established.
Many firms seem to base their market strategy on one question: Where can the company achieve the biggest market growth and share?
I would propose the better question to discuss at the board room table during a strategy planning session should be: Where can the company achieve the biggest market growth and share, while taking into account the risk of patent enforcement? and then as a followup: How should the company time market entry based on risk and rewards of patents in the industry? Answering these questions also forces the company to define what type of patent portfolio they need in order to be competitive in the long term.
A patent portfolio made without business context will have no long term ROI for the company.
Returning to the cited paper, we can see that using such strategic actions can shape the future business ecosystem and outcomes for a company. In other words having a patent strategy as part of your business and market strategy should highlight these risks, and help position a business for both current and future growth. It will help companies avoid creating growth in the short term, that may be later blocked by a thicket of competitors patents in markets where strong enforcement is possible.