While obtaining and maintaining patents are expensive, patents may increase a potential investor’s valuation of your company.
By Christina Hsiang, Lisa K. Nguyen and Olga V. Mack
Should you patent your product? Here’s why three attorneys recommend* you should apply for a patent and rules of thumb to follow in the process.
Patenting: Costs and Benefits
Among numerous benefits, patents may increase a potential investor’s valuation of your company, provide marketing opportunities, bolster your market position and lead to revenue-generating licensing opportunities. Obtaining and maintaining patents are expensive — legal fees, translation fees, patent office fees, validation fees, maintenance fees add up, especially when a company pursues patents outside of the United States.
Thus, developing a high-level strategy that accounts for your budget constraints in light of business needs is an important first step to balance the costs and benefits of obtaining patents.
How Do I Patent on a Budget?
A smart patent strategy accounts for: (1) the business purpose, (2) timing and (3) the scope of your innovation. Consider the strategies below to maximize the return on your patent budget — large or small.
1. Focus on patenting core, revenue-generating aspects of your business
Don’t patent everything and keep an inventory of filed patent applications organized in logical groupings to facilitate effective strategic reviews. For example, if you’re an analytics company, focus on patenting your data processing software, not the mobile app software you may be developing concurrently.
2. Develop a patent timeline with the company’s business goals in mind
For example, accelerated review, which truncates the file-to-issue period to 12 months (as opposed to normal 24-60 months), is valuable when used judiciously to gain technology validation before a financing round or to develop alternative revenue streams (e.g., licensing). But the fees are due sooner and applications are often scrutinized more closely.
3. Consider provisional applications
Provisional applications buy you time when you’re tight on funds because they require minimal formalities and may be filed without incurring outside counsel fees. Some companies will submit their product’s technical specification as a provisional application to save the priority date (the patent rights to an invention are given to the party who is first to file for the patent).
You earn 12 months to observe the market and negotiate cross-licensing opportunities before having to convert the provisional into a patent application.
4. Anticipate the market and your industry so you are patenting for the future
Ask yourself what technologies your competitors may want or need and establish your patent position to open up those licensing and cross-licensing opportunities.
5. Take advantage of the “small entity status” if you qualify
Your small businesses may qualify for 50 percent off of filing fees and reduced compliance requirements as compared to large entities. Keep in mind that the patent fees will increase once your company exceeds a certain size.
6. File foreign applications judiciously
The cost of foreign patent protection varies greatly. For example, obtaining patent protection is expensive in Europe and Japan. But if those are your target markets, you’re better off focusing your resources in those regions. It is key to prioritize countries where you do business, where your customers or manufacturers are located, and that enforce intellectual property laws.
7. When the look and feel of a product is important to your brand, explore design (as opposed to utility) patents
Design patents are cheaper and protect the aesthetic components (but not the functionality) of your innovation. Some notable companies that have used design patents to protect their products include Apple and Crocs.
* This article is for informational purposes only and no attorney/client relationship is formed by/through this article. It is not legal advice.
What has your experience with patents been like?
About the guest blogger: Christina Hsiang is a startup lawyer and teaches hot yoga during her off time. She enjoys piecing together the big picture – from government affairs, IP, to operations – for her clients.