Maintaining market share after your patent expires

Wednesday 23rd April 2008

A patent provides up to a 20 year monopoly in an invention in return for the inventor fully disclosing the invention to the public. When the patent expires, anyone is entitled to exploit the invention. How does a company maintain its market share once its patent expires?

A company like Fisher & Paykel continually innovates to maintain and expand its business. In 1985 Fisher & Paykel launched the “Gentle Annie” washing machine, the world’s first electronic washing machine. This was followed in 1991 by the launch of the SmartDrive™ washing machine and then in 1997 by the launch of the unique double drawer dishwasher DishDrawer™. Patents for the original Gentle Annie™ technology have expired, but the original patents for SmartDrive™ and DishDrawer™ remain. Fisher & Paykel have patents for improvements but once the patent for the original technology has expired, the original technology is free for anyone to use.

There are 237 New Zealand patents that will expire in 2006 having reached the end of their 20 year term. Not all of the patent owners will be in the position of Fisher & Paykel and be able to rely on new innovative products for continued business success. But if they have planned ahead there are other mechanisms that will help reduce the impact of the loss of their monopoly.

Branding

Don’t underestimate the value of a strong brand. Methven’s Nefa™ valve was developed to protect the low pressure water cylinders installed in most New Zealand houses built prior to the 1980s from the mains pressure system. It drops mains pressure to low pressure. The patents expired in the 1980’s yet the Nefa™ valve presently accounts for about 50% of the low pressure valve market. Methven attributes this to the strength of the Nefa™ brand. Methven continues to develop strong brands, such as SatinJet™, with its new shower technology. Boots Healthcare’s international patents for ibuprofen expired in the late 1980’s and yet in 2004 its ibuprofen product Nurofen™ made up 96% of all ibuprofen sales in pharmacies in New Zealand.

Market channels

Consider market channels. Boots Healthcare was recently successful in applying to Medsafe to allow ibuprofen to be sold in shops and supermarkets, a strategic move that will increase Nurofen™ brand awareness and sales volume and help mitigate sales loss through competition.

Improve, Modify and Protect

Protecting improvements and modifications to products and manufacturing processes made after filing a patent can provide strategic advantage and keep competitors at bay.
Utilise patent clustering strategies. Filing additional patents for improvements to an existing patented product will ensure you are always one step ahead of competitors. Boots Healthcare have a number of New Zealand patents for advanced formulations of ibuprofen, such as effervescent and sustained release products, which its competitors cannot produce.
Trade secrecy may be an option. If improvements or modifications to patented products or processes are capable of being kept secret and are not susceptible to reverse engineering, trade secrecy can provide a strategic long term advantage which can well outlive the life of any patent. But beware leaks by employees and independent development by competitors. Once the secret is out, it is available for all to use. Consider the recent incident at Coca Cola. Three employees have been charged with stealing and selling trade secrets relating to a proposed new product for PepsiCo. In this instance PepsiCo alerted Coca Cola to the issue, but consider the consequences if this had not happened.

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