A startup’s guide to patents: What are they and why every startup needs to know about them

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In this post I want to explore what patents are, what protection they provide to their owners and whether they are right for all  startups

I have a startup idea; do I need to apply for a patent to protect my idea?

For many entrepreneurs, securing a patent is almost like a rite of passage for them and their startups; they feel they can’t have one without the other.  However contrary to conventional myths in the mainstream media, a patent is not always necessary for a startup to enjoy success; after all most startups are in business well before their patent application is granted; hence the term patent pending.

What is a patent?

A patent owner may give permission to, or license, other parties to use the invention on mutually agreed terms. The owner may also sell the right to the invention to someone else, who will then become the new owner of the patent. Once a patent expires, the protection ends, and an invention enters the public domain; that is, anyone can commercially exploit the invention without infringing the patent.

What rights does a patent provide?

A patent owner has the right to decide who may – or may not – use the patented invention for the period in which the invention is protected. In other words, patent protection means that the invention cannot be commercially made, used, distributed, imported, or sold by others without the patent owner’s consent.

What kind of inventions can be protected?

Patents may be granted for inventions in any field of technology, from an everyday kitchen utensil to a nanotechnology chip. An invention can be a product – such as a chemical compound, or a process, for example – or a process for producing a specific chemical compound. Many products in fact contain a number of inventions. For example, a laptop computer can involve hundreds of inventions, working together.

How long does patent protection last?

Patent protection is granted for a limited period, generally 20 years from the filing date of the application.

Is a patent valid in every country?

Patents are territorial rights. In general, the exclusive rights are only applicable in the country or region in which a patent has been filed and granted, in accordance with the law of that country or region.

How are patent rights enforced?

Patent rights are usually enforced in a court on the initiative of the right owner. In most systems a court of law has the authority to stop patent infringement. However the main responsibility for monitoring, identifying, and taking action against infringers of a patent lies with the patent owner.

Should I consider patenting my startup’s innovative products?

Yes, if you want the following benefits:

Exclusive rights: Patents provide you with an exclusive right to prevent or stop others from commercially exploiting an invention for twenty years from the date of filing of the patent application.

Return on investments: Having invested a considerable amount of money and time in developing innovative products, through exclusive patent rights, you may be able to establish yourself in the market as the pre-eminent player and to obtain higher returns on investments.

Opportunity to license or sell the invention: If you choose not to exploit the patent yourself, you may sell it or license the commercialization of the patented invention to another enterprise, which could then be a source of income for your startup.

Increase in negotiating power: If your startup is in the process of acquiring the rights to use the patents of another enterprise through a licensing contract, your patent portfolio will enhance your bargaining power. That is to say, your patents may prove to be of considerable interest to the enterprise with which you are negotiating, and you could enter into a cross-licensing arrangement where, simply put, your enterprise and the other agree to license respective patents to each other.

Positive image for your startup: Business partners, investors and shareholders may perceive patent portfolios as a demonstration of the high level of expertise, specialization, and technological capacity within your startup. This may prove useful for raising funds, finding business partners and raising your startup’s market value.

Are there any drawbacks if I don’t patent my innovative products?

Beware of competitors: If you don’t patent your invention, competitors may well take advantage of it. If the product is successful, many other competitor firms will be tempted to make the same product by using your invention without needing to ask for your permission. Larger enterprises may take advantage of economies of scale to produce the product more cheaply and compete at a more favorable market price. This may considerably reduce your startup’s market share for that product. Even small competing enterprises may be able to produce the same product, and often sell it at a lower price as they would not have to recoup the original research and development costs incurred by your startup.

Losing commercial opportunities: The possibilities to license, sell or transfer technology will be severely hindered if you don’t patent your invention; indeed, without intellectual property (patent) rights, transfers of technology would be difficult if not impossible. The transfer of technology assumes that one or more parties have legal ownership of a technology and this can only be effectively obtained through appropriate intellectual property (IP) protection. Without IP protection for the technology in question, all sides tend to be suspicious of disclosing their inventions during technology transfer talks, fearing that the other side may “run away with the invention”.

Locked out of a profitable market: You have to consider the possibility that someone else may patent your invention first. The first person or enterprise to file a patent for an invention will have the right to the patent. This may in fact mean that, if you do not patent your inventions or inventions made the employees of your startup, somebody else – who may have developed the same or an equivalent invention later – may do so. Thus they could legitimately exclude your startup from the market, limit your activities to the continuation of prior use (where the patent legislation provides for such an exception), or ask your startup  to pay a licensing fee for using the invention.

I don’t have the funds to apply for a patent but nor do I want a competitor filing for a patent instead of me; what do I do?

To ensure that no one is able to patent your invention, instead of filing a patent application, you may disclose the invention to the public so that it becomes prior art for any patent application that will be filed after your publication, thereby placing it in the public domain (commonly known as defensive publication). Because of the existence of such prior art later filed patent applications containing the same or similar invention will be refused by a patent office on the grounds of the lack of novelty or inventive step. At the same time, if you disclose your invention before filing a patent application, you will severely limit your possibility of obtaining patent protection on that invention.

This post has cleared up a lot of issues for me, but I still have a few more questions, how do I get on touch with you?

Please leave a comment; alternatively please drop me an email at joe@ipass.me.uk; more than happy to help!

Now its over to you

And there you have it; my take on the approach startups should take when dealing with their innovative products. How are you looking to protect your innovative products if at all? Do patents scare you? Let me know in your comments?

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