Developing commercial value through IP – patently obvious?

Start-ups can live or die by their ‘idea’. Protecting the ‘idea’ is an obvious step, but it might not be the best commercial decision. A wider intellectual property (IP) strategy and a rigorous approach to understanding its commercial value is recommended to progress a company along the business lifecycle successfully.

To help identify the best course of action, here is our checklist with reasons to patent, and reasons not to.

Reasons to patent
  • Patents can be monetised, through sale or licensing.
  • Patents protect against others from damaging the business.
  • Investors look at patents as a valuable property right.
  • Patent protection reduces litigation exposure to patent trolls who may target your company, once the company is profitable and becomes a viable target.
  • Patents can make it easier for a start-up to raise funding.
  • Owning patents can facilitate joint ventures and partnerships.
  • Owning patents can enhance reputation.
  • A company’s patent portfolio is a key asset that potential investors assess when deciding whether to invest.
  • Protecting a business core ‘ideas’ maximises exit value for shareholders.
  • Protecting your idea or invention may seem like the obvious next step, but is it always the right thing to do. Deciding not to patent can be a good decision, if you adopt a ruthlessly commercial approach. It may pay dividends later.
Reasons not to patent
  • The idea you are patenting has no commercial merit. Don’t file a patent solely because you are afraid that someone will copy or steal it. Let’s be clear here – only good ideas are stolen (not bad ones) – so make sure that your idea has real commercial merit before you choose to use scarce financial resources on filing a patent.
  • The idea you are patenting is not inventive and won’t get approved.
  • You don’t have to own patents to be prove that you are an entrepreneur or an inventor, so don’t let ego or vanity cloud your decision making.
  • Investors need more than patents. Patents may protect an idea, but they don’t guarantee that customers want the product or service that exploit the patented technology. Building a business requires a coherent IP strategy which incorporates all the IP and intangible assets that constitute a brand.
  • It’s better to focus on the brand. Less than 1% of all products sold have patent protection. Most (if not all successful businesses) have a brand.
  • Protection comes at a price. Having a patent issued protects your rights as the creator / inventor and it may help deter others from attempting to steal your idea. However patent infringement is not a criminal offence and if you want to enforce your rights you will have to commence civil proceedings and it is not cheap.
  • Filing for a patent involves disclosing your invention. Disclosing your idea could make it easier for others to develop competing products and services.
  • It may be preferable to exploit the idea as a trade secret. Trade secrets are protected by nondisclosure agreements and employment law. Trade secrets don’t require public disclosure and are free from the obligation to pay the costs of filing and annual renewal.
  • Patenting the idea restricts the growth of the market and limits the commercial opportunity to develop secondary products which exploit the universal adoption of a particular technology.
So what’s the answer? It depends.

Generally, if your product is based on an idea that can be viably patented and the demand for the product is proven and protection is likely to prevent more revenue diversion than the cost of enforcement – filing patents is the best route.

Often it’s a question of timing.

Companies with expensive R&D investment prior to product development have little choice but to file for patent protection as soon as viable. For other companies faced with limited start-up capital and competing demands for cash, the initial priorities are likely to be proof of concept to secure further funding and speed to market.

It’s a simplistic answer to a complex question – file for patents when the value in having it outweighs the cost and not before.

To discuss any of the issues raised in this blog or the development of your IP strategy, please contact John Illsley.

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