What’s the point in patenting your inventions? The process is complicated and expensive. It’s also uncertain: the patent application could be rejected before grant but only after spending significant funds. And even once granted, the average small or medium sized business can’t afford patent litigation if the patent is infringed and can be bullied by big companies. So, why bother?
There are some truths and there are some myths in these statements. This article explores the advantages and disadvantages of patenting.
Advantages of Patenting
The most obvious and widely known benefit of a patent is the exclusivity it provides. Having a granted patent covering your technology gives you the right to prevent others from commercialising the protected product or process for up to twenty years. Related but less obvious benefits are that as a result of this exclusivity, the patent may be a tool that provide a larger market share than would have otherwise been possible and it also gives you the option of charging a premium for your technology. The patent can also provide a positive public relations effect, as consumers and businesses understand that your technology is innovative and superior.
Then there is the potential for licensing the patent rights. The licence can relate to practical applications which are covered by the patent, but which are outside of the activities and interests of your company, or it may relate to territories where your company is not operating.
The patent is also an asset which contributes to the value of the company. It is frequently reported that intellectual property (IP) assets form large proportions of companies’ values. If your business model is to be eventually acquired by another company, then securing your IP can significantly boost your value. Patents are also seen by investors as an important indicator that the technology is valuable and the company can retain its competitive edge (because ‘me-too’ products from competitors are barred from entering the market). It can also be useful when entering into joint ventures with others, allowing you to clearly define what IP you own.
Disadvantages of Patenting
The main disadvantage is the cost, which becomes especially significant if you are pursuing rights in multiple territories, as patents are geographical in nature and although there are some efficient ways to navigate the system, ultimately separate rights must be obtained in each territory where protection is needed. After the initial filings and prosecution, the patents must be renewed during their twenty-year life if they are to remain in force.
Costs can be weighed against the increase in revenue expected year on year for that 20-year period from having exclusivity. Any premium placed on the price of the product should also be factored in, as should any patent licensing revenue.
But you will not have exclusivity if the patent is rejected. Patent applications are examined thoroughly and if the application is rejected (for example if the examiner finds relevant prior publications that mean the invention is not deemed novel), some significant costs may still have been incurred. But there are strategies to minimise this. For example, an early official search can be requested when filing a UK patent application, with the search report being used by the Intellectual Property Office (IPO) a few months later, well in advance of the deadline for filing for foreign protection. If the search report is negative and accurate (as confirmed by your patent attorney), pursuing the patent can be abandoned before any other costs arise.
Another drawback is that patents are published, potentially revealing to competitors the details of your proprietary technology. You may have devised a better method of manufacturing which is not revealed by the sold product. In such a case, keeping your manufacturing method as a trade secret will usually be the best option. However, it should be borne in mind that reverse engineering is generally permitted and even if significant effort is required to reverse engineer your technology, then it could still be discovered by third parties and would still be considered as being “published” according to patent law.
You may decide that your technology innovation is just not commercially important enough to justify the cost. But you may be worried that someone else patents it later and tries to enforce their patent against you. You can protect yourself from this by using the much-underused strategy of ‘defensive publication’. This involves you publicly disclosing the innovation so that anyone trying to patent the innovation later will not have a novel invention (and so their patent is either not granted in the first place, or would be invalid if the grant did occur, for example if the prior art was not picked up during examination).
There is also the perceived problem that the patent will simply be ignored by others, particularly large companies with deep pockets. While this does happen, it is actually quite rare. Executives of all companies want to minimise risk. They do not want to expose their company to potentially high damages for patent infringement, and they do not want to have to inform their shareholders of potential litigation (or keep this from them).
Although the language used in patents can be quite peculiar to the layman, patents are examined for clarity so that the scope of patent rights is clearly described. The patent has also already been ‘stress tested’ during official search and examination procedures and so is presumed to be valid until proven otherwise. In most cases, patent professionals on both sides (and the patent judge) will generally agree on what the patent covers. That is one reason why relatively few patent disputes ever reach court.
If someone infringes your patent, the first course of action should be to have your patent attorney send them a ‘cease and desist’ letter. In most cases, after some negotiation, this will resolve the matter. If your patent attorney is advising you that your patent is genuinely being infringed, then it is highly likely that the infringer’s patent attorney is telling them the same thing.
On the rare occasion that litigation is necessary, there are ways to mitigate costs. For instance, various insurance companies offer IP insurance to cover the cost. And the English Intellectual Property Enterprise Court (IPEC) is an alternative and less expensive venue (although there is a maximum limit of £500k to the damages that can be claimed).
So Why Bother with Patents?
Patents will not always be the answer. Sometimes, alternatives such as trade secrets or defensive publications will be more appropriate. Nevertheless, they have their place.
Today, the globalised world moves at internet speed. And new technologies such as rapid prototyping and 3D printing have slashed the time required to get a product to market. So being first to market provides considerably less competitive advantage than it used to. Large companies have the resources to reverse engineer a new product and get their own version onto the market within weeks. They also have the brand awareness and marketing resources to capture a large share of the market. In such a situation, only an IP right such as a patent can prevent this. How else could small innovative firms compete?
There are numerous successful companies that were built on the back of even a single patent. All of the biggest tech companies have huge patent portfolios. They also act as a defence. Try to sue them for infringement and they’ll retaliate in kind. In many situations, the patent should be your weapon of choice.
To discuss whether patents could add value to your business, do get in touch with Peter McBride at mail@scintilla-ip.com or give us a call on +44 141 255 0295.