Startup companies need patents. However, there is always a tension between the lack of capital and the need to protect the intellectual property of the venture. Patents are extraordinarily time-sensitive. Since 2013, the USPTO awards patent rights to the first inventor to file in the United States. Therefore, there is urgency in getting protection on file.
When do I file the patent?
The time to file a patent is when the invention is no longer guess-work. The legal standard is where “one of ordinary skill in the art can reproduce the invention without undue experimentation.” For software, this might be at the white-board stage. For a mechanical device, it could be the first or second prototype. For a medication, file when you have your first data from animal testing. Someone skilled in the field must fully understand how your invention works.
Do I need a prototype?
Technically no. However, the quality of your patent filing often increases dramatically through the prototyping process. When you build something, you discover problems (and solutions) you didn’t know existed. For software, it is usually good to scale up an alpha-level build. Including a user-interface (UI) in the patent application is highly useful in conveying the flow of data. Formal “line drawings” replace photographs of a prototype before the patent grant.
What should the patent filing cost?
If you need to buy time, you can typically file a high-quality provisional application for $3,000-$4,000. However, this is nothing more than a 12-month place-holder. An accelerated, litigation-grade patent typically will be less than $12,000-25,000 or so start to finish including government fees.
Why investors love patents
Patents are critical for raising capital. If you just have an “idea” there is nothing for the investor to use as collateral. However, investors can put a security interest on a patent portfolio as collateral. In other words, there is something “tangible” for them to lend (or invest) against. This is why every startup company needs patents. Investors also love “granted” patents over those that are “pending.” Why? Because any known and unprotectable invention can be “patent pending.” If you get your first patent granted quickly, the investor can “kick the tires” of the patent grant and have some understanding of the protection.
Get the bird in the hand
Successful patenting is almost never “one-and-done.” You typically secure multiple patents of differing scope. One patent might be very broad (but more subject to invalidation). Another patent is narrower, focused on a specific commercial application. However, the narrow patents are difficult to invalidate. The strategy here is to first file an accelerated patent application and get meaningful claims on the first round. You want that “bird in the hand” early to show investors you at least have patent protection. Before that first patent grants, you file a “continuation” where you might seek broader (or alternatively more focused) claims. The point is to get the patent early for your investors. Otherwise, they have no way to evaluate what (if any) exclusivity the technology will enjoy.
The pioneering technology often is lost
The tragic consequence of limited startup capital is delaying the patent process. The startup is usually formed because there is a ground-breaking concept that changes the economics of an industry. However, the startup forgoes the patent process but publicly discloses the invention to help get attention. That public disclosure triggers a 1-year statutory bar to patentability. A patent application not filed within that 1 year results in the invention becoming “public domain.”
Recommendations to startups
Get your first patent through early and make it a high-quality patent. An investor will hire their own patent attorney and inspect the patent grant before putting in any serious money. If the patent grant checks out, the valuation of the company has dramatically increased. The startup now has collateral, marketing value, and technology exclusivity. Another advantage of getting into the patent process early is getting the landscape. If you discover you have no exclusive rights to the technology then you can revisit whether the endeavor is worth years of your time.
Conclusion
A technology startup’s value is its intellectual property. Hence, startup companies need patents. The earlier you secure the patent, the higher the immediate valuation and potential for success. Serious investors inspect the IP carefully. They look critically on the quality of the patent grant. Does it create a meaningful barrier to competition or is it merely “expensive wallpaper.” File a non-provisional with accelerated examination under Track One. If that first patent grants with good protection, then you have achieved the first step towards startup success.
