A new year brings with it inevitable changes, and along with those changes comes a degree of uncertainty, particularly given the volatility of the global economy. Trade disputes, posturing and market fluctuations all portend a 2019 that can have a significant impact on intellectual property. While sorting through all the details of current events is a complex task, I believe there are several overarching trends that will influence the patent system over the next twelve months.

Technology convergence accelerates IP risk

Technology changes create another area of concern for IP, and the march of technological progress will only continue as industries collide. We are no longer in a world where cell phone technology, for example, is restricted to use in the mobile devices themselves. Businesses in every industry are being forced to become more high tech to keep their doors open in our highly competitive economy, through sustained innovation. Technology is becoming a part of nearly every purchase we make, from smart speakers in our homes to advanced safety and communications technology in our cars. Now, as the Internet of Things becomes an inescapable part of our lives, patents that were once only applicable within the mobile industry itself are increasingly finding their way into the product development process for a wide variety of industries. Businesses are exposed to IP risk from more areas than ever before and must mitigate that risk just to stay competitive. Organizations need IP protection from all industries; a deeper IP legal strategy is required.

China becomes a major force in IP

Impacting IP on a global scale is the emergence of China as a major player in IP. In fact, China has been filing twice as many patents as the United States over the last year, upending traditional thinking that the U.S. is the most important market for IP consideration. Businesses that aren't already working to obtain patents in China are increasingly at risk. Some of the major players in the Chinese market are already taking steps to protect their IP, including Alibaba, JD.com, TCL and Lenovo.

Furthermore, domestic patentees in China may begin to pursue a widespread policy of home-courting against international businesses. There remains the question of whether other Chinese companies such as Huawei or ZTE could sell their patents to patent assertion entities (PAEs) that will seek profits from litigation against alleged infringers without producing anything themselves. Obtaining the rights to Chinese IP assets for product development can make a tremendous difference for U.S. companies, which should be looking for partnerships that give them inroads to China.

Another aspect to consider regarding China is the trade war between it and the United States. IP is set to become a major front in the trade battle, with no end currently in sight. Some changes to U.S. policy in the past have created a degree of uncertainty as to the enforceability of U.S. patent law in China. This has harmed the state of U.S. IP globally. There is some good news here, however. The current director of the U.S. Patent and Trademark Office, Andrei Iancu, has stated a goal to reinforce controls and improve the strength of U.S. patents. This means, of course, that IP values will increase for U.S. patent holder. This success does bring about some additional concerns, however. Greater patent value increases the risk of PAEs initiating litigation against companies who sell product in the US, further underscoring the importance of taking protective measures against litigation.

Where will the markets go?

First comes the potential for a global recession, which is likely according to a study of CFOs conducted by Duke University. This could impact patent development in several ways. First, when corporate budgets feel the pinch, R&D tends to be first on the chopping block. Slowing down product development means fewer patents filed. Existing patents, on the other hand, can also be impacted as struggling businesses look to prune their portfolios or divest themselves of patents. Privateering could also be utilized as a way to boost revenue. This in turn potentially stifles competition and further reduces technical innovation in an ongoing cycle. Other factors such as Brexit will add further wrinkles to the situation and create additional challenges for IP protection.

And, what about Standard Essential Patents (SEP)?

Speaking of technology change, we can now see that a mobile Standard Essential Patents (SEP) showdown is on the horizon. Building the mobile devices we all love is only possible through technology standards adopted by manufacturers throughout the industry, and these products are protected by SEPs licensed for that purpose. In the wake of legislative and judicial reform over the last 8 years, SEPs have become much less valuable as companies like Apple and Samsung have taken such a large share of the market. Landmark technology court cases such as FTC v. Qualcomm will have a major impact on licensing practices and patent value moving forward, which could in turn shift the IP priorities of the patent holders for the foreseeable future. As conditions change, these powerful players will do whatever it takes to maintain their revenue streams through strategies including monetization and privateering for their non-SEP patents. This will impact tech companies, but we will also begin to feel the repercussions of these decisions in a cascading effect bleeding into other industries that utilize some of these patents. Overall we foresee much more litigious conditions for U.S. based businesses.

It's hard to predict some of the specifics of IP law as we look to the future, but the signs are very clear when we take into account current events, impending policy decisions and the political climate. Organizations across all industries need to take a proactive approach to protecting their IP domestically and abroad, as well as seeking protection from competitors looking to profit IP at their expense. The best course of action is to partner with a strong organization of like-minded businesses that can shelter one another from litigation and form productive relationships that allow for expansion and growth into new markets and industries. Rather than ignoring the issue and addressing challenges only as they arise, this is a grand opportunity for companies to take control of their IP destiny and create a road map to a more profitable 2019 and beyond.

Ken Seddon is the CEO of LOT Network, a non-profit community of companies committed to protecting themselves against PAEs and their patent lawsuits.