First, a diversified patent portfolio provides defensive strategies upon an accusation of patent infringement. An accusation of infringement may take the form of a “cease and desist” letter or via service of a complaint suing for patent infringement. In either instance, the notice of potential infringement necessitates a formal analysis into the merits of the accusation. This analysis drains resources from the normal business activities of the accused infringer. This resource drain measures in time, intellectual effort, and, of course, money.

Moreover, the stringent legal requirements of the formal analysis to determine whether the accused is actually infringing necessitates a specialist. Specifically, a competent patent attorney must conduct the analysis, called an infringement analysis or non-infringement opinion. And, if the notice of infringement takes form of a formal lawsuit, then additional resources must be allocated to answering the complaint.

The party alleging patent infringement realizes that the accusation will drain resources, forcing an early settlement. Early settlement – even in instances of non-infringement – does not necessarily mean fair and equitable settlement. To illustrate, assume that there is a strong case of non-infringement. To prove this, the innocent non-infringer must present its evidence to a federal judge in a Markman hearing. Getting to a Markman hearing and vindicating the non-infringement position is costly in terms of time, intellectual, and monetary resources.

Thus, even the innocent non-infringer is forced to negotiate a settlement, or face mounting legal fees. This negotiation, however, may not find two equally matched opposing parties. This imbalance will benefit the party alleging infringement if the accused party has an inadequate patent portfolio. Conversely, a strong, diversified patent portfolio presents strategic defenses in this situation.

For example, a diversified patent portfolio may present potential counter-claims against the original, accusing party. Détente forces the original alleging party to retreat, or at least come to the bargaining table with as much to loose as the accused. The affect of the diversified patent portfolio, therefore, keeps competition where it belongs, in the marketplace, and out of the courtroom.

Second, and perhaps, more interesting, a diversified patent portfolio provides offensive strategies allowing a company to exploit a market advantage. One market advantage arises from the legal monopoly awarded to the patent holder. For a limited time, the patent holder may exclude others from using, making, selling, offering for sale, or importing the patented invention. A comparison of patent protection to the metes and bounds of real estate property illustrates this market advantage. The patent creates a wall around the estate and the patent holder, as the owner, may decide who may enter the estate and what they may do on the estate. The more patents in the portfolio, the more exclusive territory held. This clearly provides an unfair competitive advantage to the patent holder.

A second market advantage arises from the freedom to compete in the market. Used offensively, the patent portfolio allows exploitation of certain embodiments covered in the patent without hindrance from competitors. And, simultaneously, creates barriers to competitors, who must avoid all embodiments of the patented invention – even if the patent owner is not commercially exploit all embodiments of the invention.

A third market advantage stems from the perceived value. End customers may recognize, through the patent owners marketing efforts, the value of the patents – seeing the patent owner as a leader in the field.

The ability to license technology, reaping income from under exploited patents, makes a fourth market advantage of a diversified patent portfolio. A fifth market advantage includes the expanding opportunities to cross license the technology – again allowing the patent owner to compete freely in the market and stay out of the courtroom.