Patents: The Reality

Quick Summary: Patents take time and money; it might be better to focus on other things.

Abstract:

The thought of protecting your idea with a patent is natural.  A patent can indeed offer a level of protection, but with it comes a significant commitment of time and money. In the end, an entrepreneur must carefully weigh the business value of a patent versus the alternative use of resources.

For an entrepreneur or new company, securing a granted patent is certainly an excellent external validation that you have documented a unique idea.  Potential investors will certainly enthusiastically check off that box.  Aside from the well-deserved bragging rights to friends and family,  a granted patent does little more without a significant amount of additional effort that may not be obvious until later.  This negative portrayal does not imply that patents are of no benefit, it only is intended to imply that you need to thoroughly weigh the pros and cons of starting down the patent road. Some things to consider are discussed below.

Contrary to what you commonly hear in the advertisements, applying for patents requires the skills and expertise of an experienced patent attorney.  Advertised online services are intended to get you hooked.   There is far more art than science in writing a patent.  Patent attorneys possess an incredible amount of skill and understandably charge for it.  As the process continues, they bill for their time. And those bills can quickly add up.  Fees of $50,000 or much higher can be incurred.

Patents can take years to grant.  Two to three years is not uncommon.  In the meantime, expect attorney’s fees to be regularly incurred when each Patent Office action or request is made.  Once the process is started, it is hard (emotionally) to stop.  Filing a Provisional Patent can start the process.  However, a hastily worded Provisional Patent can have severe repercussions when the actual patent application is submitted.  A Provisional Patent provides no protection other than establishing a date for your idea.  Since a Provisional Patent provides no real protection and may not lead to the actual granting of a patent, investors are likely not to place much value on it.

 There are a number of points that should be considered:

  • Should you file a patent at all or rely on trade secret or copyright protection?      
  • Should you file one patent or multiple patents?
  • How many claims should you make, broad or narrow?
  • Should you file domestically and in different international regions?
  • When should you start the process?
  • Should you file a Provisional application?
  • When are you going to offer a product for sale?

These questions are best answered by a patent attorney - who obviously has a vested interested in all of the answers.  This comment does not mean to question their integrity or professionalism, it is just a fact that they bill for their time when you retain them.  They obviously believe in their profession and the value of patents and the protection they can provide.  You have to make the business decision as to a patent’s potential value to your business.

Additionally, consider:

  • The real power of patent is only determined after it is challenged and a successful outcome of litigation or a settlement occurs.  Again, these actions require the involvement of professional legal counsel and more investment. Ignoring known infringements can negate your future claims.
  • The value of a patent is highly variable.  A well respected Managing Director of a major patent evaluation, litigation, and sale firm stated that as a rule of thumb if a granted patent is worth “X”, it could be worth “10X” if the patent is actually implemented in products that have been successfully deployed in the market.
  • Selling a patent (not a product that relies on a patent) to a major company is easy to envision, but very hard to achieve for a number of reasons.  First, the “not invented here” syndrome by those tasked with reviewing the patent may result in a less than a fair and balanced evaluation.  Second, the company’s own patent attorneys are likely to find ways around the patent that could be pursued at a fraction of the cost that you are expecting to receive from a licensing or sales agreement.  Third, the company could simply decide to violate the patent and take the chances that their staff lawyers can simply outspend and outlast you during legal proceedings if they ever go that far.  To be fair, sometimes a “little guy” does win; every once in a long while.
  • Patents, when made public, reveal your secret sauce - allowing others to copy it in whole or in part.  Many countries simply do not protect patent rights of others, and litigation can be very costly with no guaranteed outcome no matter how strong the infringement case is.

All in all, patents can be a solid asset, but they will cost lots of money and time both initially and throughout their life.  Weigh their actual value with other demands for your time and money.  Patents alone will not lead to success.  They can only be one part of your overall business.  Operating cash always seems to be in short supply for newer companies.  Are the patents expenses worth it vis-à-vis other uses of that cash?  Each business has to answer that question objectively.

 

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