Patent Playbooks: How Growing Companies Prepare for Larger Rivals

A patent playbook is a prepared set of patents that read on the products of a specific company likely to assert patents against you, together with the evidence showing that its products use them. If that company sends a demand letter or files suit, a playbook may give you claims of your own to raise, which can change the negotiation, sometimes toward a cross-license.

Growing technology companies are often most exposed to patent assertions just as they become successful, and many have few patents of their own at that point. A defensive patent playbook may improve a company’s negotiating position when it owns enforceable claims that potentially cover commercially important products of another company. The potential leverage depends on claim scope, validity, enforceability, available infringement evidence, ownership, applicable licenses, and the resources required to assert the patents.

Why growing companies become targets

A company with a recognizable product, real revenue, and few patents presents an attractive target. Larger competitors may assert patents to slow a rising rival or to extract a royalty. The growing company, with little to assert in return, has limited leverage in the negotiation that follows.

The same imbalance shows up in financing and acquisitions, where investors and acquirers ask about patent risk. One point is easy to confuse: owning patents does not by itself establish freedom to operate. A company’s own patents give it rights to exclude others, not a right to practice its product free of others’ patents. A playbook addresses negotiating leverage, which is a different question from whether a product infringes someone else’s claims.

Two examples from the technology industry

LinkedIn is one of the most clearly documented examples, through its own team’s public account. In a series of articles published in 2017, members of LinkedIn’s legal team and their outside advisors described how the company approached this problem. By their account, LinkedIn in 2012 was a well-known brand with a small patent portfolio, and it decided to address the resulting risk directly. From 2012 to mid-2016, it grew its organic portfolio from 36 to more than 1,000 patent assets and purchased more than 900 patents. Its own filings addressed longer-term risk, and acquisitions addressed present and near-term risk.

The team described building a playbook for each “company of concern”: a list of applicable patents and the products that used the claimed inventions, with evidence of use for the key patents. Their guideline was that a good playbook should contain three to ten patent families. The stated goal was for each playbook to show use by the asserting company’s products and services with more than $1 billion in revenue, with a target of shifting the licensing amount that might otherwise be claimed against LinkedIn by $20 million to $200 million. Those were the team’s goals, as they described them, rather than reported outcomes. (IPWatchdog; Richardson Oliver Law Group case study)

Facebook faced the problem in public in 2012. Shortly before its IPO, Yahoo sued Facebook for infringing ten patents. Facebook, with a relatively small portfolio at the time, was reported to have bought about 750 patents from IBM, and it then countersued Yahoo on ten patents of its own. Yahoo argued that Facebook had bought most of those patents shortly before asserting them. In July 2012, the companies announced a settlement that included a patent cross-license and an advertising partnership. What role any particular patents played in that outcome was not made public. (TechCrunch; PRI; InfoWorld)

Most companies will never operate at that scale. The approach can be adapted to portfolios of different sizes, but its usefulness is highly situation-dependent. For smaller companies, the cost of developing and maintaining a counter-assertion position may outweigh the expected benefit, particularly where their patents have little overlap with a larger company’s products.

How a playbook is built

1. Identify the companies of concern. Start with a short list: larger competitors, incumbents in adjacent markets, and companies with a history of asserting patents. The list changes as your market changes, so it should be revisited periodically.

2. Understand their products. For each company, identify the products and features that matter most to its revenue. A playbook that reads only on a minor feature usually carries less weight than one that reads on a flagship product.

3. Map patents to those products. Review your own patents and applications, and any you might acquire, against each company’s products. For each candidate, the question is whether every element of a claim can be matched to the product.

4. Assemble evidence of use. For the key patents, document how the product practices each claim element using public sources: product behavior, documentation, technical publications, and teardowns. This is where detectability matters. Claims that can only be proven with access to a competitor’s internal systems add little to a playbook.

5. Keep it current. Products change, patents expire, and new companies become concerns. A playbook is maintained, not written once.

Where the patents come from

Your own filings. These are the long-term foundation. When drafting, consider not only your own product but how the claims would read on what larger companies in your market build or are likely to build. A specification that describes alternatives and variations supports claims that reach those products.

Continuation applications. A pending continuation lets you pursue new claims based on your original specification, which can be directed at products that appear after you filed. The claims must still be supported by what the original application disclosed, which is one reason a thorough first specification matters.

Acquisitions. Patents can be bought from operating companies, through brokers, and from portfolios being sold off after restructurings. Acquired patents can provide coverage quickly, particularly against a specific threat. They need diligence before purchase: clean ownership, remaining term, maintenance fee status, existing licenses or commitments, and validity risk. One question deserves special attention: whether the company you want to assert against already holds a license to the patents, for example through an earlier agreement with the seller.

The limits of a playbook

A playbook is most useful against companies that make or sell products. It generally offers much less leverage against an entity that does not make or sell products of its own, since there may be little or nothing to assert against. Defending against those assertions usually relies more on other tools, such as invalidity challenges, licensing arrangements, and defensive patent pools or networks.

A playbook is also a potential deterrent, not a guarantee. Any value comes from changing what a rival expects to gain from asserting patents against you, and the outcome of any dispute depends on its facts.

A version that fits a startup budget

A smaller company does not need hundreds of patents to apply some of these ideas, but whether any of the steps below makes sense depends on its budget, its market, and the strength of its claims. A scaled-down version might include:

• Drafting first applications on core technology with claims that would reach the approaches larger companies are likely to take, where the disclosure supports them, not only your own implementation.
• Considering whether to keep an application pending in important families, weighing the cost against the value of claims that can follow the market.
• Keeping a short list of companies of concern and noting which claims might read on their products.
• Revisiting the plan at funding milestones, when budgets grow and diligence intensifies.
• Evaluating targeted acquisitions when a specific threat appears or a gap matters for a financing or acquisition.

A practical takeaway

Patent strategy for a growing company is not only about protecting your own product. For some companies, it also includes having something to raise if a larger rival asserts its patents. It can be worth asking your patent attorney or agent, early, which companies could plausibly assert patents against you, whether a defensive position is realistic for your portfolio, and whether your applications should be drafted with those companies’ products in mind.