When it comes to legal representation and legal counsel for high-growth businesses, one of the first questions we’re asked is around intellectual property (IP) law and patent filing.
“What is a typical IP strategy for startups?”
“Do I need a patent?”
“Do I need a patent attorney to file a patent?”
“Where do I find a patent attorney?”
It’s typical to ask these types of questions as you’re just starting out, need to protect your idea and your technology, and are beginning to have discussions with investors.
Still unsure if your business needs IP protection? VentureApp can help. Sign up and schedule a free 30-60 minute consultation with our business experts and will provide direct introductions to the right legal support you need.
Intellectual property is something that can easily be swept under the rug during the early stages of a business, but it deserves a good, hard look as your company scales, products evolve, and competitive risk elevates. Start by educating yourself and applying those learnings to your own organizational situation.
First and foremost, you should have a solid understanding of the IP law types – trademark, copyright and patent. For the purposes of this post, let’s start with patents. Here are the three types of patents relevant to startups:
Design – these patents are typically the easiest to obtain, and you can usually get one pretty quickly. The reason? They don’t offer too much protection in comparison to a utility patent. In essence, you’re protecting your design or appearance vs. any features or functionality.
While you can get one typically within 12 months of filing an application, a design patent could be useless if a competitor makes a change to the appearance but keeps all the backend inner-workings of your idea. These types of patents are important for a business creating a design – think clothing, etc. Some UI/UX-focused companies might find this incredibly important, too. Here’s a good Q&A on TechCrunch on the topic, between attorneys Beth Ferrill and Lauren Dreyer of Finnegan, and UX/UI designers Erik Dreyer of GoodShuffle and John Sanchez of Academy. Design patents typically last for 20 years and there are no maintenance fees.
Utility – these patents are the most frequently issued and are much more in-depth as they cover more than simply the front-end design. They cover new and useful processes, machines, and manufacturing so that other companies cannot infringe on your sales, production or usage of the product.
A utility patent can cost you thousands of dollars in the early years of your company’s formation, after various finding, filing and maintenance fees. There are also yearly maintenance fees – but, once secured, utility patents are good for 20 years. Another important consideration – according to the United States Patent and Trademark Office, the average wait time to get a utility patent approved right now is 26 months.
Do you feel it’s too early in your startup for a utility patent?
A provisional patent application might be a good option as you’ll need less details, less money, and you’ll receive it in a shorter amount of time. With a provisional patent, you establish an early filing date and can list “patent pending” to scare off any imitators, however the patent will not eventually evolve into a utility patent. Instead, you will have to get a granted application by filing a separate but related utility patent within one year of the provisional patent.
So, back to your business…
How do you know if you need a patent?
The patent system doesn’t always have the best reputation in the business world, especially the startup community. For some, patents are viewed as unnecessary and fraught with trolls trying to play the system. Others realize that to protect your IP, filing for a patent can be necessary.
Forbes ran an article by David Pridham and Brad Sheafe, the chief executive officer and chief intellectual property officer of patent advisory and optimization firm, Dominion Harbor Group. It does a great job of detailing the benefits for startups of filing for a patent to protect IP — for one, it facilitates venture capital investment, helps a startup defend against large rivals or early incumbents, can help a startup increase market share, and more. Of note, in a 2015 study, Cao, Jiang, and Ritter found that “patents strongly and positively predict the long-run performance of VC-backed IPOs.”
The question of whether you NEED a patent really depends on your business and your technology. Basically, think like a competitor: Was it really hard to create your technology, but easy to mimic? Will larger competitors with access to more resources have an easy time replicating your idea? And most importantly – do you care? You need to be realistic about the core functionality of your technology and whether any other company can perform the solution you offer better than you and your technology. If you’re questioning the answer to any of these consideration, patent protection might be something to consider for your business.
The biggest take-away that we’ve learned from our patent law research is that acquiring a patent isn’t necessarily to fight your competitors and “idea stealers” in court. Instead, it’s a useful tool that can be used throughout the lifecycle of your business to help obtain funding, licensing, partnerships, acquisitions, etc. By doing a cost benefit analysis relevant to your specific scenario, you should have an idea of how the cost of a patent will pay you back over time in likely and ideal scenarios.
OK, so you want to move forward with patent protection.
How do you file for a patent?
Head over to the United States Patent and Trademark Office online to learn more, check to make sure your patent is not already taken, and get an application. The application will require descriptions, drawings, and patent claims or basically, what is included in or makes up your invention – think methods, products, etc. A third party product, for instance, could hold up the patent process. You’ll then be assigned an examiner who will review your application and correspond questions to you about the invention – the stronger the application/patent claim, the less back and forth with the examiner, which could take years. This is why it makes sense to hire an expert to help with your patent application (we can help you find the right counsel – see the end of this article!).
Let’s also consider the fees – according to USPTO:
- The filing fee, which is non-refundable whether or not a patent is granted.
- The issue fee (you pay this only if your application is allowed)
- Maintenance fees (paid at 3 1/2, 7 1/2, and 11 1/2 years after your patent is granted – these fees “maintain” your legal protection).
- Additional fees may be required.
So, yes, it costs a lot of money, and it takes a lot of time.
Is it worth it? If you can’t come to a conclusion on your own, you likely need some legal counsel to help you decide. In some cases, you might be able to adequately cover your idea with other IP protections.
Look into the following intellectual property coverages:
Trade secrets consist of information and can include a formula, pattern, compilation, program, device, method, technique or process. To meet the most common definition of a trade secret, it must be used in business, and give an opportunity to obtain an economic advantage over competitors who do not know or use it.
Copyrights cover copy and creative works. If you are a publisher or your copy is extremely important to your business, it makes sense to be covered – think articles, books, software, etc.
Trademarks cover words, symbols, designs, etc. that identify a business – essentially, a brand name, log, tagline etc.
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