I gave a talk today to some University students/staff who are at various different stages in their entrepeneurial journeys. Intellectual property accounts for a significant amount of a company’s value, especially in today’s knowledge economy, so I was emphasising that it is important for new companies to have a think about where their IP value lies and how to protect it; and also to be aware of the potential rights of third parties.
One interesting question arose, and that was about how a young start up company could afford the costs of pursuing patent protection. This question comes up again and again because in order to be valid a patent has to be filed before any disclosure of the relevant invention is made. So this places companies in a position where they have to consider patents from an early stage.
The person asking the question mentioned a figure that sounded like a “big firm” kind of price to me, but then I did not have the context of the situation. While patent attorney charges are by necessity correlated to the amount of time taken to prepare a patent specification, there are a number of practical points to consider when faced with this problem.
First of all, one should carefully assess the business case for pursuing patent protection. Sometimes a trade secret will be more effective, or a defensive publication can be made. Also, how will a patent demonstrably improve your bottom line and what is your strategy for pursuing infringers? And in which countries do you need protection? What is the specific business case for each country?
Once you have decided to pursue patent protection, the first thing to do is shop around! Drafting a patent is essentially a creative process and different patent attorneys may have different approaches. Different patent attorneys will also have different levels of expertise in your subject area which may influence how much time they think it is likely to take to prepare a patent specification. It may be prudent to ask for a price to be agreed in advance. If this is done, make sure that you understand what the conditions are for that price. And of course if you happen to mention that you are asking around for quotes you might be surprised at how that affects prices. Then, when you have a set of alternative prices to consider, you will need to weigh up which provider is going to put in the most effort and which one you feel comfortable working with. Try to avoid going for a price that is obviously a “loss leader” and focus on the patent attorney that you think you could develop a long term working relationship with.
Another tactic is to delay the filing as much as possible. However, this does involve some compromises as you will not be free to disclose the invention. An exception to this is disclosure under the cover of a non-disclosure (confidentiality) agreement. Another tactic is to make sure that your disclosures do not mention the specific innovations that you want to patent. Patents are granted for the features that make an invention work so sometimes you can disclose the “end results” without going into details of how you got there. However, before making any disclosures you should check them over with a patent attorney, as disclosures may affect the inventive step and hence validity of any future patents.
Once it’s time for filing, another thing you can do is ask your patent attorney about spreading the costs of the filing over a period of time. From a credit control perspective regular small payments are better than a large debt that goes unpaid for a long time, and you might be surprised at how flexible your patent attorneys can be.
And finally, if you are in the fortunate position to be attracting funding, make sure that IP costs are budgeted for and are included in any business plans or projections that you prepare.
I hope these practical pointers are of help – if anyone has any ideas about how to fund patents for early stage companies we’d be grateful to hear them!