“IP has the shelf life of a banana.”
~ Bill Gates ~
Defining Intellectual Property (IP)
My approach to IP is to assume the role of the Founder is to pose important questions to be followed by concise answers. IP refers to creations of the mind: inventions; literary and artistic works; and symbols, names and images used in commerce. IP is divided into two categories: Industrial Property includes patents for inventions, trademarks, industrial designs and geographical indications. Copyright covers literary works (such as novels, poems and plays), films, music, artistic works (e.g., drawings, paintings, photographs and sculptures) and architectural design. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and broadcasters in their radio and television programs.
Alternative definitions of IP are knowledge, creative ideas, or expressions of human mind that have commercial value and are protectable under copyright, patent, service mark, trademark, or trade secret laws from imitation, infringement, and dilution.
IP includes brand names, discoveries, formulas, inventions, knowledge, registered designs, software, and works of artistic, literary, or musical nature. It is one of the most readily tradable properties in the digital marketplace. When considering the definition of IP one needs to recognize that it is evolving and is likely to change in meeting the needs of businesses in the future. Two examples of this change are the discoveries of new organisms, and their unique DNA, and the emergence of digital based inventions. These two fields of discovery are examples of how IP law needs to evolve from traditional products and services to remain relevant. However, being aware of past evolutions of IP law helps professionals today to better recognize, and deal with, IP as it exists in the present and what may be required in the future.
A detailed review of each type of IP is beyond the scope of this work and so I’ve limited this treatment to patents, trade secrets, trade-marks and copyrights. Given the complexity of simply defining IP, a nuanced Founder will consult their IP Law Team before deciding on what definition fits their circumstance. However, it’s critical that every employee has a basic understanding of IP, how it impacts the Firm and the role they play in developing and protecting it. Greater detail can be found in the hyperlinks and references.
Amidst all the recent attention-grabbing headlines of Silicon Valley IPOs, there is some discussion as to whether we are experiencing an ‘IP Bubble’. It’s becoming as important as ever for small and medium enterprises (SMEs) and start-ups to have a clear IP strategy in place, one that is aligned with their organization’s unique business strategy and needs. For startups the prospect of where to even start with an IP strategy can be a daunting task.
It may seem easiest to leave this to law firms and other third parties, but that is not always feasible right at the start, due to budgetary constraints and that the firm should never outsource its strategies.
What are the most important factors that start-ups should consider when formulating their IP strategy?
An IP strategy should support long-term product development goals, not just ad-hoc innovations. It should be driven by the firm’s product development road map which provides a 3 to 5 year vision of where the firm desires to positions its offerings. Given businesses have a geographic dimension the patent strategy should reflect these geographies and subsequent market segments. For instance, if a company seeks to gain a competitive advantage through ultra-light lithium-ion batteries, its patent claims should highlight these aspects of its battery technology (i.e. an ultra-lightweight material composition).
Similarly, if the company’s main competitive advantage is through safer batteries – ones that do not explode – this core safety feature should be protected by the patent claims. Where these innovations will be sold and thus protected needs to be anticipated. Given today’s globalized marketplace worldwide patents are becoming more important but also increase the cost of creating and maintaining the patent estate. In addition, the value of any given patent is not absolute, but relative to competitor patent filings.
An effective IP strategy becomes just as much about market intelligence as it is about claims construction. This is where patent searches and competitor patent analysis fit in. For example, armed with the knowledge that Siemens or General Electric is patenting a similar lithium-ion battery, a start-up may decide to patent design-around technologies, develop corporate partnerships or licensing agreement with these companies, or decide to pivot to a new product line entirely.
What key questions should be asked when establishing an initial IP strategy.
- Who owns the fundamental technology in your space – i.e. who are the key organizations filing and buying patents in your market segment and what are they working on?
- How rapidly is new innovation taking place in your space?
- Where are the opportunities for strategic growth, investment or licensing within your field?
- Where are the new and emerging technologies being developed in your space?
- Which patents are the most valuable for your products?
See the following link for additional questions for consideration.
What if I only have the budget to file a limited number of patents?
The quality of a company’s patents is just as important as the size of the patent portfolio. Filing patents indiscriminately on every single idea that comes out of your R&D efforts is a waste of money, as these “innovations” may not be useful to your final product, or may be covered by previous patents (prior art). Thus, even without budget considerations, there should be a business case behind filing each patent. The patent should protect the company’s core technology and competitive advantage, provide licensing revenue, or make the company attractive to acquirers and investors.
Filing patents strategically, requires a prior art search for relevant patents in your space. Only by finding all the relevant prior art can you decide the value in proceeding with a patent application, or if you need to work around this prior art. In addition, a prior art search can help you address, within your patent application, how your innovation is an improvement on all of these previously patented technologies. By showing how your patent differs from current technologies in your patent application, you show the patent examiner (and courts in future litigation) that you have done your due diligence and conscientiously made an effort to innovate. This bolsters the strength of your application and increases its likelihood of surviving patent examiner scrutiny and future court battles.
What are the pros/cons of using trade secrets, in place of patents, given startups normally lack free cash flows?
Companies choose trade secrets over patents for three main reasons: to avoid the costly patenting process, to avoid disclosing company technologies through patent publications, and to take advantage of trade secret protection for a period longer than the period for patent protection (20 years). Trade secrets have considerable risks, however, and much weaker protections than patents. Though trade secret law allows you to go after employees who leak confidential information or companies that steal your technology, it does not protect you from competitors that independently develop your technology. In fact, your major competitor can patent the same invention and sue your company for infringement! Now that the US is switching to a first-to-file versus a first-to-invent system, the fact that your company invented the technology first will have less bearing in a patent lawsuit. In addition – the common adage is that a secret is no longer a secret once two people know about it. The costs of separating manufacturing processes and concealing your technology may end up being more than patenting in the first place.
We are a small company with an even smaller budget. What should we expect to spend?
The cost of filing a patent application with the USPTO may be in the range of a few hundred dollars to a couple thousand, depending on the number of claims. This is only a small part of the expense, however, as attorney’s fees, prior art searches, and professional drawings may range from $5000 to $20000+ depending on the complexity of the technology.
Don’t fret too much about the fees, however, as patent protection is crucial for most tech industries – and may be an important component to getting your start-up funded in the first place. In the long term, a company will generally need to spend $1 million over the course of a patents lifetime (20 years) for application fees, attorney fees, and renewal fees. This makes it critical for companies to constantly re-evaluate their patent portfolios over time to ensure that their patents are still providing value for their product development, or should instead be licensed or sold to prospective buyers for additional revenue.
Are there ways we can do any of this on our own or through more affordable, alternative service offerings and tools (e.g., filing our own patents without using a legal firm)?
Before seeking help from outside consultants, or counsel, startups can define their product development goals and the purpose behind any patenting regime. This will help narrow the scope of patent searches and patent filings, reducing the costs of each.
IP Checkups provides custom patent searches, landscape analysis, and strategic advice for startups at a reduced fee, such that start-ups need not waste time on cumbersome Google patent searches, or money on licenses for expensive patent search products. All of these services are provided in collaboration with your start-up – so the more upfront work you can do in developing your patenting goals, the lower your fees will be. In addition, a subscription-based PatentCAM service provides patent search, monitoring, and analytics services in an online database. Your patent searches of interest are updated on a weekly or monthly basis, allowing you to avoid paying attorney or consultant fees for each new prior art search or patent landscape analysis.