Assess potential revenue generation from your intellectual property (IP) and the necessity of patents

Patents are an important part of the commercial value of a tech startup. Patents offer value to a company because:

  • They can impede other companies from using your technology to develop a competitive product
  • They can generate revenue if another company wishes to use your technology but has to buy or license it from you
  • They may foster valuable business alliances with companies that require your product or technology

Consequently, it is worth considering what intellectual property your company has, how it can generate revenue and whether it needs to be protected through patents.

Sometimes a startup’s products or technology cannot be protected through a patent.

If this is the case, and the product is difficult to reproduce by others or can be obtained most economically from your company, you may still be able to market the product or technology to generate revenue.

Angel investors or venture capital firms may be reluctant to invest in a company unless the intellectual property can be protected with patents.

Timing strategies for your patent

An invention cannot be patented if it has already been publicly disclosed. There is a one-year grace period in Canada and the United States, but not in Europe. Public disclosure can include:

  • Publication
  • Seminar presentations
  • Poster presentations
  • Abstract submissions for conferences

Therefore, take care not to wait until after public disclosure, as the invention will then be non-patentable.

Another timing strategy is to delay public disclosure until there is sufficient information and finances to file a patent.

Financial considerations for startups

Tech startups often do not have the financial resources to pursue a patent. Consider the following when deciding how to proceed with a patent application:

  • How much of the worth of the company rests on protecting the intellectual property? Should it be a high priority to protect?
    • The full cost of patent prosecution (which can be from $5,000 to $20,000) can be deferred by filing a provisional patent. A US provisional patent application may cost from $1,500 to $2,500, and the complete patent application can then be submitted up to one year later. However, the complete patent application must be supported by whatever was filed in the provisional application. You can’t change your mind later and claim more in your patent application, if you want to use the priority date of the provisional application.
  • Some government funding is available to assist technology startup companies with patent application costs.

Patentability searches in your patenting strategy

Before starting a patent application, look for “prior art” using a patentability search.

What is prior art?

Prior art is any existing public description or related invention. The existence of prior art might not exclude you from patenting your invention, but it may narrow the scope of what parts or applications of your invention you can patent. This can help you avoid the unnecessary costs inherent in filing a patent application that is too broad or even unsuccessful.

Freedom to operate searches

A “freedom-to-operate” search is similar to a patentability search, but serves a different function. For example, your company may need to carry out a certain process or use a certain material.

A freedom-to-operate search will discover whether that process or material is already patented. If it is, you may have to obtain an agreement with the patent holder in order to carry out your own business.

Potential investors in your company will want to know that your company has done a freedom-to-operate search and secured any necessary agreements for your operation.

Which jurisdictions to file in?

A patent must be obtained for each country or region in which protection is required. The most common jurisdictions to file a patent are the United States, Europe and Japan.

Where your startup files a patent depends on where your market is, where your competitor’s market is, where you can enforce the patent and how many jurisdictions you can afford to file the patent in.

Once a patent application is made in one country, patent protection can generally be sought in other countries or jurisdictions within one year.

Alternatively, although there is no such thing as an international patent, a Patent Cooperation Treaty (PCT) application can be filed. Once a PCT application is filed, national or regional patent applications can be made subsequently.

References

Canadian Intellectual Property Office. (2009,December 9.) Retrieved December 15, 2009 from http://www.cipo.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/Home

World Intellectual Property Organization. (n.d.) Retrieved December 15, 2009 from http://www.wipo.int/portal/index.html.en