1. Why do entrepreneurs need to protect their technical and scientific innovations?
If you start a grocery store, you probably are not selling a technical or scientific innovation, so your goal is to execute better than the grocery store down the street. You likely will compete on price, quality, and service. Businesses that develop technical and scientific innovations, such as Tesla, Apple, and Novartis, as well as startups, spend enormous sums of time and capital developing the next big thing. These companies directly capitalize on that innovation. Ideally, nobody other than the entrepreneur who developed that innovation can commercialize it, giving the entrepreneur the exclusive right to own and potentially build the protected market/product. Think of it another way—why spend all this time and effort to move the market forward just to let a competitor use it…and reap the benefits of your hard work!
Indeed, parties looking to acquire an innovative company (or analysts for an IPO) take a hard look at whether the technical and scientific innovation of that company is adequately protected. Unfortunately, poorly protected innovation can kill enterprise value and even kill a deal. Venture capitalists, private equity, angel investors, and others will make similar analyses because they strive for a positive return on their investments through an acquisition or IPO.
2. How can I protect my innovations? I’ve heard of patents, trademarks, trade secrets, etc.
To protect your innovation, you can apply for a U.S. patent. Its owner can stop anyone else (an “infringer”) from making, using, or selling the patented invention in the U.S. In fact, the owner of the patent can stop an infringer even if the infringer independently developed the technology themselves by accident.
There are three other ways to protect your intellectual property, although these FAQs focus on patents. They are:
- Trademarks: Protects your brand
- Copyrights: Protects your creative works
- Trade Secrets: Protects information that is valuable to a company (e.g., processes of making things, formulas, customer lists, etc.).
3. I don’t have the resources to sue someone who is infringing. Why bother patenting my invention?
Don’t worry. You, the entrepreneur, likely won’t sue anyone for infringing your patents. Instead, you are building a war chest of patents that a potential acquirer can use to protect market share. If you aren’t building your company for an acquisition, you may grow to the point where you can have the resources, or find outside resources, to protect your position by asserting your patents. Even if you do not sue an infringer, just the mere fact that you have the patent may require competitors to design an inferior product to get around your patent—ensuring that the patent owner has a better product to commercialize.
Patents have other important functions too and can produce unintended benefits. For example, if someone sues you, then you may have some patents to shoot back at the people suing you (assuming they infringe your patents). Strong patents may also dissuade some competitors from asserting their own patents against you. Sometimes, you can license your patents as an additional source of revenue (see below). I’ve often seen cases where a competitor buys a company after discovering their strong patent portfolio. Acquiring is sometimes easier than fighting a strong patent position.
4. How do I get a patent? Can I prepare a patent myself? I can write a good technical description.
My opinion: The person on TV says: “don’t try this at home.” Sorry, but it takes three to five years after law school for me to “take off the training wheels” of a new patent attorney. There are so many subtle pitfalls that even experienced patent attorneys can miss as the laws rapidly evolve. Also, do you want the crown jewels of your company to be protected by someone who doesn’t know how to do it? It is clear during diligence when someone takes that shortcut, and it can kill the deal…or at least have a significantly deflating effect on enterprise valuation.
A patent is not primarily a technical document. In fact, it is not primarily a legal document. Instead, it is a business document—a tool to protect and grow your company.
The typical patent process in the U.S. begins with preparation of a carefully crafted, customized patent application focused on the innovation and, hopefully, how it is going to be applied to your business. Although optional, you preferably conduct a pre-filing search to see if your invention is novel and non-obvious, and if not, modify your filing strategy to ensure value in the ultimate patent. Then, after filing, the examiner conducts a search and rejects the patent application in a document called an “office action” (yes - that happens the vast majority of the time, so stay calm!).
You and your patent attorney then figure out the strength of your case in view of the examiner’s rejections and the prior art you know about, as well as its commercial value at this stage. At that point, you prepare a carefully crafted rebuttal, known as a “response” or “amendment,” perhaps amending the patent application (i.e., the claims usually) and/or making legal arguments supporting patentability. You also may call the examiner to discuss your case, which I highly recommend. This back and forth may repeat a couple more times until you receive a “notice of allowance,” indicating that you have an allowed patent application that is ready to become an in-force patent.
5. What experience should I look for in a good patent attorney or patent agent?
This is a terribly difficult question, particularly for someone new to the patent world. I’ve been hiring patent attorneys for a couple of decades and made plenty of mistakes myself.
One key error: many entrepreneurs naturally tend to over-focus on the technical/scientific background of the patent attorney. While that is important, patent attorneys without the direct technical background still have the capability of learning and applying your technology, and few will say they can’t handle it. One caveat: if your business is biotechnology, you should at least ensure the patent attorney has a background in life sciences. If your business is in the physical sciences (e.g., mechanical devices, medical devices, software, electrical, consumer goods, etc.), you should ensure that the patent attorney has a background in physical sciences.
There are many factors to consider beyond technical/scientific experience, such as:
- How long has this person been a patent attorney? Do they have relevant experience?
- If they have been practicing less than six years, do they have an experienced supervisor managing them?
- What kinds of clients do they currently handle?
- Do they have experience with startups? Entrepreneurs?
- How would they work with you? Run a few scenarios by them or ask for examples.
- What are their fees for typical tasks, such as writing patent applications, responding to U.S. Patent and Trademark Office rejections, etc. Note: hourly rate may be deceiving. Ask for total costs of these typical tasks you should expect to pay. If you spend an hour interviewing a candidate patent attorney and that patent attorney doesn’t discuss costs, it may raise a flag.
- Ask for references. You could look up this attorney online and see some of their clients and ask to speak to specific clients so you don’t get the “cherry-picked” clients of the attorney.
- Do they do the work or hand it off to a junior person? Who does the work?
- Do they just write patents or have they been involved with litigation, diligence, opinions, and other activities that apply patent rights against a product, formulation, method, etc.?
- Do they have supplemental experience that can enhance their representation of you (e.g., personal startup experience? Investing in startups? Teaching experience?)
- Do they have experience with patenting overseas?
- Who is on their team?
- How comfortable are you working with this attorney?
6. What if I told someone about my innovation? Is it too late to protect it?
“Loose lips sink ships.” My general advice is to keep your innovation secret (e.g., within your company) until you file for patent protection. If you do publicly disclose it before filing for patent protection, you still may have hope. If you file within one year in the U.S., you may preserve rights in the U.S. Outside of the U.S., you generally are out of luck after you publicly disclose the invention. Some countries, however, will give you a grace period like in the U.S. if you file directly in their patent office within a certain period of time of the public disclosure. I was surprised to see how many countries let you do that (e.g., Japan). Despite these backup positions, file first! As a default, before publicly disclosing any new technology, check to see if it needs to be protected.
7. What are the legal requirements to get a patent?
There are a lot of requirements, but the two biggest ones are:
- Novelty: Nobody else in the history of humankind has invented your idea and publicly disclosed it. In other words, you’ve created “the world’s first ___________” (fill in the blank).
- Non-obvious: If it is novel, then the examiner makes a somewhat subjective judgement as to whether your novel invention is a non-obvious variation over other items similar to your invention. Admittedly, this is a simplified definition of obviousness, but to keep things simple, let’s stick with it.
Unless you are an experienced patent attorney, when trying to determine if patent protection is an option, focus more on novelty as that is easier to understand. Non-obviousness is complicated and not terribly concrete. For example, one examiner may think an invention is obvious while another may not agree.
8. How do I find out if someone else invented my concept first? Is there a way to search for my concept?
Unlike writing a patent, you can, and should, search for your concept yourself!! When searching, I tell entrepreneurs to focus on novelty (a “novelty search”) and ignore non-obviousness. Indeed, there are plenty of rich databases to search for your invention. You can start by searching Google to get a high-level view, and then follow up with any of a variety of different patent search sites. Note that although most of the common search databases search patents, just view the patents as if they were papers describing their technologies.
A few good databases are:
You also can hire firms that specialize in searching patents (typical cost for novelty search is $450-$700). Law firms can search too, but the cost is typically higher than that of a search firm.
People in the patent world refer to information used to determine if your invention is novel and non-obvious as “prior art.” You can think of prior art as the storehouse of publicly available human knowledge before you file your patent application. As such, prior art includes not just prior patents, but papers, websites, pictures, presentations, and products, among other things.
9. But someone told me not to search patents because it can get me in trouble. Is that true?
Before the mid-2000s, there was some risk, but that risk is greatly diminished now. Don’t worry about searching. You need data to make intelligent decisions on the direction of your patent portfolio. Search away!
10. Is software patentable?
I like to say, “software is not not patentable.” No, that’s not a typo. When someone makes that assertion, they are highlighting their misunderstanding of patent law. Yes, some software is not patentable, but a lot of software is patentable. Yes, it has become more difficult and less certain since 2014, but the law is still unsettled, so a strong opinion of whether a certain software invention is patentable or not patentable is probably hard to make. I frequently secure patents to software-related inventions!
11. Even if I can legally get a patent, are there reasons to not get a patent?
Of course! First and foremost, does the patent help advance your business goals? You need to get a return on your investment (ROI). For example, as discussed above, does the invention protect your market share, cover potential competitor business, or will it command a healthy license? If not, even if it is the coolest invention ever, you probably want to forget about patenting it. In addition, if you could never determine if a third party is infringing the patent, then you also may want to skip the patent. This comes up a lot in manufacturing processes and some software processes. In that case, you may want to keep it as a trade secret.
12. All this sounds expensive and I think neither my technology nor business is ready. I heard about a “provisional” patent application, which is supposed to be helpful for early entrepreneurs. What’s that?
Sometimes an inventor is not ready to make the commitment to a full patent application. For example, the invention may not be refined enough or the business case may be unclear. In that case, you can make a less formal filing in the U.S. Patent and Trademark Office, known as a “provisional patent application,” describing the invention with as much detail as you can muster. There is no need to describe the state of the art, the problems, or even the benefits. Then, one year after you file the provisional patent, you can start the normal patent application process and retain the effective filing date of the provisional application. The catch: you only can get that effective filing date for information that is disclosed in the provisional application. New things in the non-provisional technically are not entitled to the filing date of the provisional application.
Why is the earlier filing date important? Well, the first one to file a patent wins…period. Also, anything published after the provisional patent application, but before the nonprovisional filing date, cannot be cited against your properly supported non-provisional application.
13. After I file my patent, I can sell my patented product with no worries, right?
Maybe. A patent only gives you the right to stop others from making, using, or selling the patented technology. However, a patent has nothing to do with whether you can sell a product. Someone may have a patent on a part of your patented technology and you would need to get that patentee’s permission before selling. For example, if your invention is a new car motor, but someone has a patent to a car in general, you can’t sell a car with the new motor simply because you have a patent on the motor. Of course, the party owning the car patent can sell cars, but not one with your motor. To do that, you may need to trade rights so you both can share the market, assuming your motor is important to the party owning the car patent.
People often refer to the ability to sell your product or service as “freedom to operate.” That’s an in-depth analysis that examines live patents to determine if the product you intend to commercialize infringes anybody else’s patents. Most startups do not need an extensive freedom to operate analysis, although there are exceptions. Even if you are early, it still can benefit you if you keep an eye on third-party patents to catch the low-hanging fruit of close patents.
14. A university owns some patents that I’d like to use. How can I do that?
A patent is property that can be sold (“assigned”) or rented (“licensed”). Thus, if a university owns a valuable patent, you can approach their Technology Licensing Office (TLO) to see if they will grant you rights under the patent through a sale or license.
15. Ok, tell me more about licenses. What are some common terms?
There are two main types of licenses:
- Exclusive: Only the licensee obtains the specified patent rights. For example, only one person can practice the patented product—the exclusive licensee. That right may be divided up among several parties in complementary ways. For example, one party could have the exclusive right to sell east of the Mississippi, while another party can have the exclusive right to sell west of the Mississippi. There are plenty of other ways to divide up exclusivity, such as between different product lines or industries.
- Non-exclusive: the patent owner can license the same thing to multiple parties.
Common license terms include:
- Compensation to patentee, such as royalty rate (e.g., a percentage of revenues), timing of payment of royalty rate
- Minimum annual royalty
- Length of license
- Obligations of the parties to enforce patent in the event of an infringement
- Sub-licensing rights
- Termination events
- Reimbursement of past costs for preparation and prosecution of the patent (common in academic licenses)
16. Hold on—a license sounds like a big commitment. I’m not ready for that yet. Can I wait a while to take a license?
A party interested in licensing a patent may ask the patent owner to hold the patent open for potential license until an agreed upon date. Of course, the interested party typically pays the patent owner for this right. Universities commonly do this by granting an “option” to a party to exclusively license the patent by some agreed upon date.
17. Does my U.S. patent protect me in other countries?
No. A U.S. patent only protects you in the U.S.
18. How do I protect my invention in other countries?
Ultimately, to protect your invention in other countries, you must file for patent in other countries. Unfortunately, this process can be enormously expensive-multiple times more expensive than the cost of protecting in the U.S. Thankfully, there are procedures you can use to delay that expense for 30 months or more after you first file for patent. Your U.S. patent attorney leads that effort with patent attorneys in all of the different countries—there (thankfully!) is no need for you to look for even more patent attorneys