Power Lunch: Sowing a culture of patents
With a little cultivation, smart food companies can turn their patents into profit centers.
By Joe Berghammer, Partner, Banner & Witcoff | 09/24/2005
When America was in its infancy, food manufacturers were part of the vanguard of patent protection. One of the first five U.S. patents protected a method of processing flour. Today, 200 years later, food-science companies continue to invest a great deal of money and effort to excel in research and development. Alarmingly, however, many food-science companies do not complement their research and development with robust patent protection.
Many food-science companies have fallen behind the leaders of other industries, such as electronics and biotechnology, by not viewing all of their developments as potentially patentable goods. To return to the vanguard, food manufacturers and other companies in the food-science industry are well advised to adopt a strategy that encourages and invests in patentable ideas that may provide for long-term gain.
An example of how a food manufacturer’s patent strategy can work is seen in the biblical parable of the sower. In this story, the farmer threw many seeds to the earth in the hope that some would bloom into prosperous plants. Some seeds will fall onto non-fertile ground; others will take root and provide profitable harvests.
A similar intellectual property strategy has been implemented by many technology companies, allowing them to reap tremendous benefits. In fact, through such strategies, technology companies have made patents such an integral aspect of their business that, as one Forbes forecaster recently put it, patents are “the currency of our new economy.”
Food-science companies can turn their patent group into a profit center by imitating high-tech companies, such as IBM, that cultivate thousands of patents each year and force other companies to buy any of the "winning" ideas, generating billions annually from the practice. In 2004, the Intellectual Property Owner’s Assn. listed IBM as the world leader with 3,248 patents. This portfolio allowed IBM to earn nearly $11 billion in licensing revenue during the past 10 years.
After seeing the benefits patents provided IBM, Hewlett-Packard implemented a similar strategy. After experiencing some financial problems in the early 1990s, HP kicked off a patent campaign called Invent HP. The campaign included tangible financial incentives for HP employees who disclosed ideas for potential patents and even greater rewards for ideas that later became patent applications. These financial incentives helped to generate new ideas. As one HP employee put it, “I was able to remodel my kitchen with the extra money I received from the patent applications I filed.”
Other technology companies have followed IBM’s lead. Most of the top 20 patent recipients in 2004 were technology companies. Sadly, none of them was a food manufacturer.
The complex systems used for developing specialty foods or combining spices and ingredients into new flavorings are, at their core, technological innovations that can be protected by patents. This does not mean food manufacturers must overhaul their R&D departments and feverishly develop patents. Indeed, most companies cannot replicate what IBM has accomplished. However, even a moderate patent revitalization can turn a company’s patent portfolio into a profit center.
A recommended goal for many food-science companies is to boost patent filings by 30 percent. This can be accomplished by engaging in "legal R&D." In short, a handful of researchers and lawyers can be tasked with interviewing employees in what is called “invention harvesting sessions” to collect ideas and then turn the best ones into patent applications.
The next step, now that the food-science company owns these patents, is to determine ways to leverage its portfolio and maximize its investment. Such leverage can include licensing or selling the patented technologies in lieu of developing them. McCormick & Co., the food manufacturer best known for its spices and herbs, boldly promotes the strength of its research and development, which has produced extremely valuable patents. Far from simply putting its ubiquitous red canisters on grocery shelves, the 115-year-old company dedicates most of its resources to R&D and, subsequently, to patenting a wide array of consumer products, including batters, spices, sauces and marinades.
Numerous technology companies have developed patent strategies and programs that allow them to thrive. Food-science companies can do the same thing. Through a robust patenting program, a food science company can protect its new products of today, tomorrow and 10 years from now. Moreover, a culture of patent encouragement coupled with a licensing strategy can create a new division within the company, the patent licensing division, which exists as an additional revenue source for the company.
We always learn from each other. Many food-science companies can learn from electronics companies that have developed robust patenting programs and seen licensing revenues develop into a consistent profit stream. By adopting similar strategies, food companies who have fallen behind regarding their intellectual property can once again return to the vanguard of intellectual property, protect their inventions and secure their position within the food-science industry.
About the Author
Joe Berghammer is a partner at the Chicago office of Banner & Witcoff Ltd., an intellectual property boutique law firm. E-mail him at firstname.lastname@example.org