For a company dealing in industries including transportation, healthcare and power, responsibility for the IP department at General Electric is no easy task. WIPR talks to Carl Horton, chief IP counsel, about how the company protects and values its IP.
It’s not surprising, then, that the biggest question facing him is how to detect infringement and when, if at all, to take action.
For some companies, particularly in the US patent system, protecting and enforcing IP consists of multiple lawsuits and million dollar demands. For others, it’s a more complicated process. GE is in the latter category: with products ranging from medical devices to jet engines and wind turbines, detecting infringement in the first place is one of its most difficult tasks.
It is this problem which has created debate within company’s US headquarters, in Fairfield, Connecticut, about whether traditional forms of protection such as patents remain the most viable solution. For Horton, the concept of protection through trade secrets is becoming a more alluring prospect.
“Ever since I’ve been a practitioner there has always been a robust dialogue on whether it is better to protect a new innovation with a patent or as a trade secret,” says Horton.
“I would say GE spends a disproportionate amount of time on registered rights simply because the process of filing and perfecting these rights is very detailed and involved.
“However, as the digital age kicks in and the industrial internet [a term coined by GE to describe the convergence of industrial equipment and internet-linked sensors] begins to take shape, guarding the proprietary information and the trade secrets that make GE competitive has become increasingly more important and also more difficult. As a result, trade secrets have emerged as a much more significant component of IP our strategy,” he says.
“The more difficult it is to identify infringement, the more likely we are to try and protect our innovation via trade secrets. The rationale is that if we can’t discover potential infringement, then we are less likely to enforce the patent right anyway, so why tell a competitor in a printed publication what we have invented?”
However, despite a trade secret’s offering of “infinite life” if adequately protected, problems remain, says Horton.
With a majority of GE's inventions and products in the public domain, keeping them entirely under wraps can be a tricky task, especially if rivals can observe the product and find alternative means of achieving the same end result.
Horton explains: “Today people are very adept at reverse-engineering a wide variety of products. When a product can be reverse-engineered, especially if its lifespan is less than 20 years, you will probably be best served by filing a patent on it and getting a full 20 years’ protection.”
The patent advantage
Horton has examples of when the patent system has benefited GE, pointing to the company’s wind turbine disputes with other industry competitors.
As the largest producer of wind-turbine technology, GE has been involved in litigation over products that bore a striking similarity to many of its most valuable patents.
Two of the disputed patents, called ‘low voltage ride through’ and ‘zero voltage ride through’, enabled wind turbines to stay connected to the electricity grid when voltage approached or actually reached zero.
“We knew it was good technology so we offered to license it to many in the industry, the thought being that it could be a win-win if the industry players were willing to license the patents for what we thought they were worth. Many of the industry players saw the wisdom in this approach and negotiated licences.
“We believe the patents were broad and thought that it would be difficult to make a product to connect to the grid in this day and age that met the demanding customer specifications without having this technology at play.”
With a business as big as the wind turbine industry—GE has deployed in excess of 16,000 turbines globally—it’s easy to see why Horton was keen to take instant measures to protect the company.
It is this philosophy which he transfers to the wider issue of protecting and enforcing the company’s IP across all products.
“When first discussing how to enforce GE’s IP, I ask our engineers what is the most valuable technology we offer, and the specific fields in which GE seems to have jumped ahead of the competition. From there we will look at the patents we filed to protect these specific technical discoveries. Assuming we were the first company to break through these technical barriers and that such solutions are valuable technology, others are inevitably going to want to follow.
“We tend to look at the places where technology is most commercially valuable and where the IP thus has a disproportionate value.”
For Horton, aside from wind turbines and jet engines, one of the other lucrative areas is the healthcare industry.
“Discoveries in this field tend to be so ground-breaking and so commercially valuable that they can become foundational for several decades. If so, there is tremendous value in such IP,” says Horton.
“For products that are mechanically driven there are often different ways to configure the product to achieve essentially the same result and thus to design around the patent on which such products are based. With chemistry-related products, on the other hand, there is often only one unique combination that effectively opens the lock on that invention, eg, a compound that helps diagnose a particular disease. If you can patent that combination, you essentially have a lock on the successful invention.”
However, according to Horton, the very breakthroughs in science and technology that lead to broad, valuable patents, cause some to argue that the rewards granted by such patents are too rich, regardless of the millions of dollars spent developing these technical advances.
Horton points to organisations, including government bodies, which claim that robust IP protection and enforcement is discouraging innovation and putting prices out of reach of ordinary consumers.
India’s decision to grant a compulsory licence on Bayer’s cancer drug Nexavar is one of a number of decisions recently to have caused controversy in the pharmaceutical industry.
“The anti-IP activists make similar arguments in other areas of technology such as the wind turbines discussed above,” says Horton.
“They would argue that we have a lot of patents that can prevent competitors from practising key technologies. But, in reality, most companies invent around existing patents or simply license the technology from the patent holder. As such, there are typically dozens of manufacturers around the world striving to offer similar technologies as cheaply as possible. Whoever invents the best solution, at the most affordable price, tends to capture serious market share. When you have that type of intense competition, you continue to see prices drop as a function of innovation.”
Sharing the love
Horton is adamant that while it is important to protect ideas, it is equally as important to share them on a commercially sustainable basis.
An example of this is GE’s initiative with the crowdsourcing website Quirky. The partnership, agreed in April of last year, will allow Quirky users access to hundreds of GE’s patents to invent entirely new uses for many of GE’s patented technologies. Horton believes this partnership could help show how the patent system actually fosters new innovation from earlier breakthrough technologies.
“The entire patent system at its foundation was meant to share information, not hoard it,” says Horton.
“The reason that governments are willing to grant up to a 20-year life on patents was because they wanted people to disclose their ideas as rapidly as they were invented. The world then has the benefit of all the information and can expand on it. This partnership is taking that principle to the next level, using the digital crowdsourcing capabilities that exist today but didn’t before.”
Based in New York City, Quirky encourages internet users to submit product ideas which other users can comment on, develop and vote for. The most promising designs are then developed by Quirky engineers and designers and sold on the site or in retail outlets including Amazon.
Ben Kaufman, chief executive of Quirky, agrees with Horton’s view.
“For years patents have become widely misunderstood and misused. We are going to return patents to their original purpose: to act as a blueprint for technological and societal progress while protecting inventors and becoming a source of inspiration for future creators,” Kaufman said at the time of the agreement.
The two firms will share royalties from the inventions should any products make it to general sale.
Horton’s obvious respect for the patent system and what it stands for is noticeable, but it is perhaps a sign of the times that, in an age of competitiveness and occasional abuse in the patent system, particularly on US shores, the company is heading toward keeping some of its more lucrative inventions under wraps.
patent infringement, General Electric, trade secrets,