Most technology companies consider patent infringement risks as rare occurrences and prefer to adapt an ostrich approach by keeping their heads buried in the sand. This approach, says Dr. Badri Gomatam, Chief Technology Officer of Sterlite Technologies, has worked well in past till Indian companies were mostly India centric and India was not an attractive market for foreign companies. Not Anymore!

Ground realities are changing and are changing at an unimaginable speed..Xiaomi breakneck expansion into the world’s fastest growing smartphone market, India, has been disrupted by the litigation filed by the Swedish equipment maker Ericsson in the Delhi High Court. The court ordered an interim ban and then royalty deposition of 100 INR for every smartphone imported into India by Xiaomi. Homegrown handset maker Micromax was directed by the Delhi High Court, in an interim order, to pay 0.8% to 1.3% of the selling price as the royalty to Ericsson for using Ericsson’s Standard Essential Patents (SPEs) on technologies used in smartphones. Other homegrown manufacturers like Intex and Lava don’t seem to have a comfortable ride either. They are dealing with patent infringement issues in various forums such as Courts and Competition Commission of India (CCI).

Recent patent infringement litigations in India indicate even homegrown companies, in the worst case, are not able to access their domestic markets and, in the best case, end up paying royalties enough to put their margins under severe pressure. Unfortunately, it is not only patent infringement risk that can adversely impact bottom line, a patent infringement litigation itself, whether or not there is infringement of patents, can dent bottom line by upto 2.5 million INR in India and around 2 million USD in USA.

Patent regime is India is already tightening. India becoming attractive market for foreign companies, ‘Make in India’ campaign and pressure from developed economies will have a multiplier effect. Despite extremely protective Chinese government, Chinese companies are facing an explosion of patent litigations in China and in overseas markets. 7,800 litigations were filed in China alone in 2010. China found the answer in the old saying – “the best defence is offence”. In 2011 China surpassed the U.S. in quantity of patent applications. In 2013 China was 300,000 patent applications ahead of its closest competitor USA.

Indian technology companies are vulnerable to patent entanglements more than ever. It is high time that sustainable solutions are found to maintain business continuity. Competing on the volume of patents might not be the best solution for Indian companies due to cost considerations and effectiveness.

However, the solution still lies in the same old saying – developing Mousetrap Patents designed to hit competition where it hurts them the most. A patent portfolio that has a limited number of high-precision custom-made offensive patents restores the Balance of Power. Such Mousetrap Patents createthe cold war kind of an equilibrium situation, where nuclear weapons were never used due to certainty of equal retaliation.

And, Mousetrap Patents can be developed comparatively cost effectively.

Mousetrap Patents target key products of key competition in key markets. The aim is to restrict freedom-to-operate of competitors by filing patents at the fringes of their key areas of activity. It starts with identification of key competition with which balance of power needs to be restored. Thereafter, their recent patents protecting their key products are identified, studied and analysed. These patents are surrounded by incremental innovation patents (or mousetrap patents) on its periphery covering all possible improvements and substitutes, endowing the power to control further developments on competition’s products. These mousetrap patents need to be protected in key markets, which are critical for competition. This allows strengthening the control over a technical field critical for the growth of competition. Some of such patents, when granted, give direct control over competition’s key growth areas. Mousetrap patents thus act as a deterrent against any misadventure by competition and serve to leverage opportunistic cross‐licensing deals or advantageous settlement conditions from litigation.

Even when some of mousetrap patents are not granted, they create sufficient uncertainty and raise patentability threshold for competing inventions and cast serious doubts on the ability of the competition to patent further developments on their key products, severely undermining their ability to achieve market exclusivity. In other words, even when some of mousetrap patents misfire, they certainly serve the strategic purpose of loosening the grip of competition on the market.

These patents endow its holder with disproportionate market power and multiply bargaining position in cross licensing, remarkably improving the returns on investment and increasing the value of intangible assets.

Investment in developing a patent portfolio having Mousetrap Patents is similar to buying an insurance policy against patent litigation risk. Patent litigation risks can arise from a well thought out strategy by a competition who intends to penetrate the market by scaring off your customers. Like natural calamities, patent litigation risks can arise from most unlikely corners in most unlikely times derailing business plans in most unlikely ways. Only option against natural calamities is to be aware, to be prepared and to have an insurance to take care of the consequences. Similarly, accepting the fact that possibility of patent litigation risk is increasing for all mid-to-large sized technology product companies with each passing day, and building a targeted and tailor-made offensive patent portfolio is an effective and sustainable way forward. A few technology product companies in India like Sterlite Technologies are leading the way in India with a patent portfolio of around 100 global patent publications