Amidst all the recent attention-grabbing headlines of Silicon Valley IPOs, there is some discussion as to whether we are experiencing an ‘IP Bubble’. It’s becoming as important as ever for SMEs and start-ups to have a clear IP strategy in place, one that is aligned with their organization’s unique business strategy and needs. For small start-ups the prospect of where to even start with an IP strategy can be a daunting task. It may seem easiest to leave this to law firms and other 3rd parties, but that is not always feasible right at the start, due to budgetary and other constraints. We’ve teamed up with Lily Li from IPCheckups, a Berkeley-based boutique patent strategy and analytics firm, to get some advice and provide some guidelines on things for start-ups to consider when they plan their IP strategy.
Q: What are the most important factors that start-ups should consider when formulating their IP strategy?
An IP strategy should support long-term product development goals, not just ad-hoc innovations. For instance, if a company seeks to gain a competitive advantage through ultra-light lithium-ion batteries, its patent claims should highlight these aspects of its battery technology (i.e. an ultra-lightweight material composition). Similarly, if the company’s main competitive advantage is through safer batteries – ones that do not explode – this core safety feature should be protected by the patent claims.
In addition, the value of any given patent is not absolute, but relative to competitor patent filings. An effective IP strategy becomes just as much about market intelligence as it is about claims construction. This is where patent searches and competitor patent analysis fit in. For example, armed with the knowledge that Siemens or General Electric is patenting a similar lithium-ion battery, a start-up may decide to patent design-around technologies, develop corporate partnerships or licensing agreement with these companies, or decide to pivot to a new product line entirely.
Q: What are the key questions to ask when establishing an initial IP strategy?
- Who owns the fundamental technology in your space – i.e. who are the key organizations filing and buying patents in your market segment and what are they working on?
- How rapidly is new innovation taking place in your space?
- Where are the opportunities for strategic growth, investment or licensing within your field?
- Where are the new and emerging technologies being developed in your space?
- Which patents are the most valuable for your products?
Q: What if I only have the budget to file a limited number of patents?
The quality of a company’s patents is just as important as the size of the patent portfolio. Filing patents indiscriminately on every single idea that comes out of your R&D efforts is a waste of money, as these “innovations” may not be useful to your final product, or may be covered by previous patents (prior art). Thus, even without budget considerations, there should be a business case behind filing each patent. The patent should protect the company’s core technology and competitive advantage, provide licensing revenue, or make the company attractive to acquirers and investors.
To file patents strategically, and get the most bang for your buck, a prior art search for relevant patents in your space is critical. Only by finding all the relevant prior art can you decide the value in proceeding with a patent application, or if you need to make design around efforts. In addition, a prior art search can help you address, within your patent application, how your innovation is an improvement on all of these previously patented technologies. By showing how your patent differs from current technologies in your patent application, you show the patent examiner (and courts in future litigation) that you have done your due diligence and conscientiously made an effort to innovate. This bolsters the strength of your application and increases its likelihood of surviving patent examiner scrutiny and future court battles.
Q: What if to save money and keep my technology hidden, I just want to file trade secrets instead? What are the pros/cons?
Companies choose trade secrets over patents for three main reasons: to avoid the costly patenting process, to avoid disclosing company technologies through patent publications, and to take advantage of trade secret protection for a period longer than the period for patent protection (20 years).
Trade secrets have considerable risks, however, and much weaker protections than patents. Though trade secret law allows you to go after employees who leak confidential information or companies that steal your technology, it does not protect you from competitors that independently develop your technology. In fact, your major competitor can patent the same invention and sue your company for infringement! Now that the US is switching to a first-to-file versus a first-to-invent system, the fact that your company invented the technology first will have less bearing in a patent lawsuit.
In addition – the common adage is that a secret is no longer a secret once two people know about it. The costs of separating manufacturing processes and concealing your technology may end up being more than patenting in the first place.
Q: We are a small company with an even smaller budget. What should we expect to spend?
The cost of filing a patent application with the USPTO may be in the range of a few hundred dollars to a couple thousand, depending on the number of claims. This is only a small part of the expense, however, as attorney’s fees, prior art searches, and professional drawings may range from $5000 to $20000+ depending on the complexity of the technology. Don’t fret too much about the fees, however, as patent protection is crucial for most tech industries – and may be an important component to getting your start-up funded in the first place.
In the long term, a company will generally need to spend $1 million over the course of a patent’s lifetime (20 years) for application fees, attorney fees, and renewal fees. This makes it critical for companies to constantly re-evaluate their patent portfolios over time to ensure that their patents are still providing value for their product development, or should instead be licensed or sold to prospective buyers for additional revenue.
Q: Are there ways we can do any of this on our own or through more affordable, alternative service offerings and tools?
Before seeking help from outside consultants or counsel, a start-up can define their product development goals and the purpose behind any patenting regime. This will help narrow the scope of patent searches and patent filings, reducing the costs of each.
IP Checkups provides custom patent searches, landscape analysis, and strategic advice for startups at a reduced fee, such that start-ups need not waste time on cumbersome Google patent searches, or money on licenses for expensive patent search products. All of these services are provided in collaboration with your start-up – so the more upfront work you can do in developing your patenting goals, the lower our fees will be.
In addition, our subscription-based PatentCAM service provides patent search, monitoring, and analytics services in an online database. Your patent searches of interest are updated on a weekly or monthly basis, allowing you to avoid paying attorney or consultant fees for each new prior art search or patent landscape analysis.
DISCLAIMER: IP Checkups is a research firm that provides technical analysis and technical opinions. IP Checkups is not a law firm. The research, technical analysis and/or work proposed or provided by IP Checkups and contained herein is not a legal opinion and should not be construed as such.