The Four Phases of Business IP

By Kelce Wilson*

*Capital University Law School graduate, 2005; also holding an MBA and a PhD in Electrical Engineering. 

Excerpted from The Four Phases of Business IP, 40 Cap. U.L. Rev. 679 (Summer, 2012)

I. INTRODUCTION

A common trend is observable in consumer, high-technology industries: many companies tend to follow a predictable, four-phase path in their usage of patented intellectual property (IP). The author denominates these phases as "Incubation," "Defense," "Saturation," and "Depletion." They are typically sequential and largely correspond with four stages of a business lifecycle: start-up, growth, maintenance, and decline. 1 Criteria are provided for identifying, within the context of patents, the particular phase in which a company may find itself. Transitions between phases--for example, a pre-Depletion transition period--are also described. Other forms of IP, such as copyrights and trademarks, may require an entirely different analysis than is presented here. 2

The first three phases--Incubation, Defense, and Saturation--are associated with manufacturing, while the Depletion phase is often defined by a company's status as a non-practicing entity (NPE). It should be noted that NPE status may be obtained by multiple routes, including the following: choice, when intentionally bypassing the first three phases; short-circuit, perhaps due to financial failure or because a new product lacks sufficient marketability to support successful completion of the manufacturer's Incubation phase; and obsolescence, when a manufacturer's product line ages to the point that it can no longer sustain the Defense or Saturation phase. 3

As a preview, the widely-touted purpose of the patent system, which is "to promote innovation," 4 is most likely to be fulfilled to its full potential in the Incubation phase, often somewhat less likely in the ...

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