Funding is always a problem when dealing with startup companies.  Startup companies typically have to balance “cash available” with expenditures related to intellectual property (IP).  Spending and allocating funds available for both research and development and IP is likewise a problem.  Assuming that the startup company is an innovation-based company, that is, the assets of the company lie in its intellectual property, such a startup company needs to develop the appropriate culture within its organization which focuses on IP  and then develop an IP strategy which takes into account cash available for both R&D and IP.  Developing this type of culture will require education. The IP strategy must include proper prior art searching so that the startup company knows the existing landscape and can develop areas of technology where innovation and invention can take place.  It is easy for startup companies to neglect prior art searching in order to save money.  This is typically a mistake since understanding the prior art associated with a company’s area of invention is critical both from the standpoint of having freedom to operate in their innovation area, and being able to carve out protectable inventions through patent filings.

Even though our new “first-to-file” patent system promotes and encourages early patent filings, there are risks with racing to file patent applications.  These patent filings must be strategically considered based upon the funds available and they must be properly drafted so as to cover the company’s core technology, particularly if provisional patent applications are being utilized as an early filing mechanism.  Weak patent applications will also be very difficult to sell to potential investors as the patent portfolio is always of concern to investors.

As a result, our advice to startup companies that are truly an innovation-based company would be as follows:  formulate an IP strategy early on in the formation and development of the company; conduct proper prior art searches in the area of expertise of the company; file patent applications early on in the development stage but make sure that the applications that are filed are properly drafted so as to cover the core technology of the company.

Any IP strategy should also include employee agreements that include a confidentiality and assignment agreement whereby employee’s agree in advance (1)  that certain aspects of the company business are confidential and the employee will not disclose such confidential information, (2) that the employee will promptly and fully disclose all inventions, ideas, concepts, improvements and so forth that we developed or contributed to by the employee during the term of employment, and most importantly, (3), that anything developed or contributed by the employee belongs entirely and exclusively to the company. This is critical to the longevity of the company. Non-solicitation and non-competent clauses may also be part of the agreement.  Also, just as important is developing Non-Disclosure/Confidentiality agreements with all third parties so that inventions and other IP are not inadvertently disclosed on a non-confidential basis.

The first-to-file patent system has both increased patent filings early on in the development stage of new technology, and it has increased challenges to the validity of patents issued.  Because time is of the essence under our new system, many companies have adopted the strategy of filing more provisional patent applications throughout the entire development stage from the conception of an invention to its completion.  Although filing early is a good strategy, the detail and completeness of these applications must be maintained in order to provide adequate protection and reliance on priority dates when non-provisional patent applications are filed based upon the provisional filings.  Provisional applications should be thorough and detailed so as to provide adequate scope and coverage for the particular inventive concept covered.  If the provisional application does not include an adequate description of the invention, it may not support the claims of a non-provisional application.  Many companies have also set up procedures to monitor the development of the new technology so as to evaluate whether subsequent patent filings are necessary.

On the opposite side of the coin, issued patents are now exposed to a wide variety of different additional validity challenges.  For example, the inter partes review process has resulted in numerous filings to challenge issued patent claims.  The same is likewise true for covered business method patents.  If you are the patent owner, extra care should be taken in preparing patent applications keeping in mind that the issued claims may very well be subjected to challenges by competitors.  If you are a competitor, corporate intelligence relating to the published patent applications and issued patents of a competitor is imperative so that a company can both know what its competitors are patenting, and can better prepare itself for challenging the validity of such patents when they issue if they overlap with their technology or future growth..  This is another recommended IP strategy.

These are issues that every start-up company  should consider as part of their overall IP strategy.  Managing and protecting your IP and knowing what your competitors are doing is the name of the game in today’s marketplace.