Should I file a patent? Patenting simplifed, John Boadway
A patent gives its owner exclusive rights to make, use and sell an invention claimed and described in the patent document. These rights last for a limited time (typically 20 years) and are given in exchange for the full disclosure of the invention in the published patent.
For innovative businesses patents are often the ideal tool for protecting core technologies or products from competition. A patent can add value to your business in numerous other ways as well. For instance, a small business relying on a single innovative product can use a patent to help capture and keep market share for that product.
On the other hand, there are situations when filing a patent application is not the most fruitful use of limited funds. Nor are patents always the best way to protect and foster innovation in your business.
Some of the most important factors to consider before deciding whether to protect your invention with a patent are briefly outlined below.
Expanding and Protecting Market Share
Generally, no entity is legally entitled to make or sell products that infringe on a patent without consent from the patent owner. As such, a key advantage of a patent is that it gives the owner an exclusive right to sell products that use the invention covered in the patent.
This is especially important for small businesses competing for shelf-space with established, deep-pocketed companies. Even a patent for a minor innovation to an existing product can be leveraged to capture market share for that product, which would otherwise be difficult to capture.
Consider an example: If your product is easy to reverse engineer and you don’t have patent for it, in most industries your product will be copied and sold by competitors. This can mean reduction or complete loss of profit margins for that product. In this situation, any first-mover advantage you may have achieved will be difficult to sustain without a patent providing a barrier to entry.
If your business is in its early stages a patent can be useful for attracting interest from investors. Investors see a patent as evidence that a business has an innovative product or service and a competitive edge in the market. Accordingly, a business that has a patent or a patent application as one of its assets can have a relatively easier time raising money.
While it can take some time before a patent application becomes an issued and enforceable patent (sometimes years), a product can be identified as “patent pending” immediately after filing a patent application—including after filing a provisional patent application.
This “patent pending” label or descriptor is one straightforward way of indicating the existence of a patent and the corresponding potential value to both customers and investors.
Another important potential benefit to a patent is that a patent is an asset that can be licensed to generate income. However, without a marketable product with which to sell your invention, it is unlikely that you will be in a position to enter into a license agreement. Typically, licensing arrangements will not occur without a history of sales. In other words a patent alone will not likely result in any license agreements.
Regardless after an invention is publicly disclosed (e.g. through an advertisement or sales) some patents rights are lost (and after 1 year all patent rights are lost) unless a patent is filed. Accordingly, it is important that your strategy for licensing and patenting be determined at the outset.
There are numerous types of licenses, each of which can be tailored to suit many needs. In essence a license allows a third party to use the licensed property (i.e. the patented invention and product) in exchange for a payment, such as a royalty, under agreed upon terms.
Typically, other than for “non-practicing entities” (so-called patent trolls), a patent is licensed along with other intangibles that are necessary or useful for carrying out the invention. For example, the patent covering certain features of a software application may be licensed along with technical details involving the programming and support required to implement and maintain the software application.
Preventing theft and preventing loss of innovation
A properly maintained patent portfolio keeps innovations within your business. This prevents or at least reduces theft of technology by departing employees or by competitors.
For example, employment agreements can stipulate that any innovation (or other intellectual property) created by the employee during the course of employment and that is related to the employer’s business will be owned by the employer. Thereafter, any invention conceived by an employee is typically assigned to the business of the employer and any resulting patent will be owned by the employer. This minimizes questions or disputes concerning ownership of inventions or innovations relating to the business, which can be important for businesses relying on one or a small number of innovations.
Is the innovation better protected as a trade secret?
As noted above, patents provide an exclusive right of the patented technology to the patent owner in exchange for the publication of the patented technology.
Due to this publication requirement and due to their limited shelf life, patents are not always the best way to protect your company’s innovations. Protecting an innovation as a trade secret or simply as confidential information is sometimes a better alternative, depending on the invention and industry.
If your innovative technology cannot be reverse engineered and if you have internal mechanisms (including contracts, such as appropriate employment contracts) in place for keeping the technology or innovation confidential then you may not want to disclose the inner workings of the technology in a patent.
Lawsuits and defensive patents
Importantly, a patent does not prevent lawsuits against your business even if you’re selling products that are covered by your own patent. In other words, even if you have a patent over your product, selling that product might infringe on another party’s patent. For example, another business might have an issued patent for a small component of your product.
However, there are some ways that a patent can be leveraged to defend against a potential patent lawsuit resulting from this type of infringement.
For instance, any patents your business owns can be used as negotiating tools in the face of a competitor’s patent. By way of example, a threat of a counter lawsuit using your business’ patent can pressure the entity that is suing your business to come to an agreement (such as a cross-licence of patent rights).
I have outlined above what I suggest considering before deciding whether to pursue patent protection for your innovative product or technology. There are likely many other considerations that are specific to your situation, but the most overriding factors are those identified above. To avoid the risk of losing potential patent and other intellectual property rights, it is important that your intellectual property strategy be considered as part of an initial product development or business plan. If you are a small business or start-up company, a brief discussion with a patent lawyer is all you need to understand what your ideal intellectual property strategy should be.
About the Author
John Boadway is a lawyer, patent agent, and trade-mark agent practicing out of the intellectual property law firm, Rowand LLP. He specializes in providing tailored strategies to early-stage and start-up companies for protecting and securing intellectual property rights.
Article Author: MAKO Design + Invent
MAKO Design + Invent is a full-service consumer product development firm servicing both high-growth corporate manufacturers and invention startups. With a 25-person team across 3 offices (Austin, England, Toronto), MAKO has complete in-house industrial design, mechanical engineering, and electrical engineering design and prototyping services. To assist our start-up inventor clients, we also have a subsidiary branch called Mako Invent that, in addition to above, helps start-ups with patenting, strategy, marketing, and sales/distribution for all consumer product categories. For our corporate clients, MAKO Design develops world-class consumer electronics designs through our industrial, mechanical, and electrical design teams.
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