The Importance of Getting a Patent For Your Startup

Have you invented a new product which is going to change people's lives? Maybe you have created new software, an innovative nutritional supplement, or life-saving pharmaceutical. Now the question is this: does your startup have what it takes to be the next big success story?

Originally posted on May 20, 2017 @ 1:13 am

Did you come up with a groundbreaking invention poised to transform the way people live? Perhaps you’ve developed new software, an avant-garde nutritional aid, or a pharmaceutical that could save lives.

Now the question is this: does your startup have what it takes to be the next big success story? If the answer is yes, and you really want to succeed, you need to start thinking about getting a patent for your intellectual property.

While it’s tempting to focus on research and development, and marketing, you don’t wait until it is is too late! Your research could go to waste without patent protection. Below are five reasons why getting a patent quickly is integral to the success of your invention.

1. Protect Your Intellectual Property

Startups face a pretty intense landscape. Forbes reports that 90% of all startup companies fail within the first five years. On the other hand, the world’s most successful companies are filing patent applications constantly. IBM files around 30 patent applications per day!

Follow the lead of successful companies like IBM, Google, and Oracle: patent your intentions early and quickly. You may want to spend your resources on creating and marketing the product. But, without sufficient patent protection, your startup could be at risk.

A patent will provide protection against competitors who will challenge your product.

You may be challenged by small companies with products similar to yours. Rival companies will see you as a threat to their market share. Large corporations also use patent litigation to shut down the possible competition. If you are planning on launching your product in the United States, patent protection is especially important. The U.S. market is known for “assertive patentees” and “unsavory operators like patent trolls.”

2. Defend Against Trolls

Patent trolls misuse patents as part of their business strategy. They don’t actually invent or develop anything. They buy patents from bankrupt companies at auction and then start litigation against other companies with similar patents.

Trolls generate income through these lawsuits instead of creating their own products.

Getting a patent does not guarantee that your product will be immune from a challenge by a competitor or a troll. However, an effective Intellectual Property attorney can help protect your ideas. Having one is your best defense against a troll.  

A good patent strategy will mitigate against possible future damage your company may incur from a patent infringement suit. A patent infringement suit costs money and loses valuable time in the marketplace. Getting a patent is your best protection against trolls and their infringement suits.

3.  Attract Investors

Getting a patent can also help maximize your chances in the world of venture capital.

Investors like companies with patents because demonstrating patent ownership indicates less risk. Getting a patent reassures your investors that you have taken steps against litigation down the road. When potential investors do their due diligence, one of the first questions they ask is if there is patent protection.

Every investor asks the same question. This includes the venture capitalists on the TV show “Shark Tank” and author Brian Cohen‘s book “What Every Angel Investor Wants you to Know.” They all want to know if you have patented your idea.

Intellectual property is an intangible asset. At the beginning of a company’s life, it can encompass up to 90% of the company’s value. IP protection indicates that a company will generate a profit. It also is a good indicator that the company will create jobs.

Sales, capital spending, and wages are all higher in IP-intensive companies.

As stated in “The Role of Patents in Venture Capital Financing,” a study by Haussler, Harhoff, and Muller: “patents are a signal of quality that facilitates access to financing and helps startups overcome the liabilities of newness.”

4.  Increase Licensing Opportunities

Reliable patent protection allows your company to be eligible for different means of generating revenue. Many companies have raked in massive profits by licensing their patented products. For instance, IBM generates approximately one billion dollars per year by licensing its products to other companies.

Software companies traditionally have been ambivalent towards patent protection. Open Source technology and the philosophy that underlies it often condones and supports the free sharing of ideas. However, as the industry has evolved, even companies who formerly advocated open source ideas and technology have moved towards patent protections.

For example, when Microsoft was a young company they did not have a large number of patent filings–now they file frequently. Microsoft also found ways to make money from discarded ideas; for example, they were reported to make over $2 billion in royalties for Android phone patents in 2013. Increasing ways your product can make money through licensing will also increase your company’s appeal to venture capitalists.

5. Encourage Acquisition

The strength of the intellectual property and its protection has played a major role in many of the most valuable mergers and acquisitions of the last decade. A contributor to the Forbes Leadership Forum listed reasons why getting a patent is important for startups; increasing the company’s chance at being acquired was a significant reason.

The article describes Google’s takeover of Nest in 2014 for over $3 billion. Nest’s patent portfolio was a strong selling point. Besides making a company attractive for takeover, patent protections also encourage other ways to grow the company. IP can lead to partnerships and joint ventures. Such relationships can economize costs and consolidate resources.

Patent protection is also crucial in preparation for an IPO. Demonstrating stability and security to investors is key. If a company can show it has sufficient patent protection, this will reduce shareholder concerns over legal risk. Patents have been the basis for some of the tech world’s most successful companies. If you’re skeptical, look at the recent success of companies like DropBox, Google, Apple, and GoPro.

How to Hire A Patent Attorney

Once you determine that your company requires protection for its intellectual property, you should find a patent lawyer who specializes in your industry. Patent lawyers have specific credentials to help you navigate this complex field of law. You’re on the website of one right now.

In order to represent clients in front of the United States Patent Office, an attorney must have passed the Patent Bar and be admitted to practice in this area of law.  This is one of the only areas of law requiring its own Bar exam. Your patent attorney should also understand your particular industry. There are different challenges at stake depending on what your invention is.

Some patent attorneys specialize in software. Others may specialize in food and drug products. It is up to you to provide your attorney with all the details about the product and process you are seeking to patent.  You should also check all the documents he or she is seeking to file. Ultimately, this is your invention and you are the expert, so if something seems fishy, check with a different attorney.

How a Patent Attorney Helps

Your lawyer should help you file for patent protection for your products and anticipated products. You may also need to apply for licenses for patented products you are using in your process. If you have not obtained a patent before, here is a short description of how the process may work.

First, your attorney will conduct a patent search. He or she will search the comprehensive database of all United States patents and patent applications. The attorney should also search foreign databases to look at patents and applications in other countries. He or she will provide advice regarding the results, and if there are patents which could affect your product. A skilled patent attorney will work with you to define your product or invention in a way which has minimal conflict with existing patents. Your lawyer will then help you create the patent application. This will include a detailed description of the invention and its background. It may include tests, drawings, and charts.

Your lawyer will file the patent application with the United States Patent and Trademark Office. The Patent Office can take up to two years to review a patent application. In the United States, the system is “first come, first served.”  If someone else files a patent for an invention substantially similar to yours while you are waiting, under the law the first inventor to file is the one who owns the product. As your product and your company evolve, your patent attorney should continue to file for patents. Any improvements or new features will also need patent protection.

Moving Forward

Getting a patent is crucial if you have a startup company and you intend to market a new product. There is no reasonable argument for not getting a patent.

A patent attorney will cost you money, as they charge for their services. However, the cost of not getting one is much higher. If you get appropriate IP protection and advice, you will have protection from future lawsuits. You will be safer from competitors nd trolls. You are also more likely to make your company a success. Startups with IP are more likely to attract investors, create other partnerships, grow and hire more employees. Larger companies are more likely to take over startups with strong patent protections.

Contact a patent attorney to help you in getting a patent for your invention.

You have everything to gain and too much to lose. Get in touch with us if you’d like to know more, or utilize our services.

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    The Adibi IP Group has built a team of motivated patent law experts working with some of the most innovative entrepreneurs and businesses in the country. We help inventors at all levels, from founders, to engineering teams, PE funds, and executives, achieve outsized returns from their IP. Connect today and learn why groundbreaking companies across the world trust us.