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Small Businesses and Startups: Planning your Patent Portfolio

If you are an inventor or a startup owner developing an innovated, new or disruptive technology (or just a better mouse-trap!), a solid patent portfolio provides the game-changing backbone for your venture. Whether you are evolving the high-tech industry or improving a thousand-year-old widget, a patent may double as a revenue-stream while serving as a shield – lending you advantages over, and protecting you, from competitors.

The Three Initial Steps to Securing a Patent

The typical patent process goes something like this: first there is an initial disclosure meeting with a patent attorney discussing your technology. Then a few weeks (or a few months!) later, you will receive a draft application from the attorney representing the technology or idea and implementation as a patent.

This process works great if you are a large Fortune 500 company with the resources to file a patent application (on every microscopic improvement!) and is already sitting on several thousand patents.

However, startups typically don’t have the in-house counsel with the specialty in patent law, therefore the patent attorney needs to fill the role of the legal strategist as well as the drafting attorney.

This is why I focus on three initial steps when engaging a new venture:

  1. Step #1: I seek to understand the current life stage of your company, your business model, your near-term goals such as investment opportunities and requirements, your long-term goals such as the exit strategy, your competitors and your potential purchasers.
  2. Step #2: I seek to understand your overarching product and/or technology plan. This is different than understanding the current implementations of a first product or the product currently under development. Rather, it’s an understanding of secondary and tertiary product launches, releases and updates. I believe the key to strong patent protection is having a portfolio of assets that work in conjunction with each other to provide: (1) current product protection and differentiation (2) claim to future space within the industry and (3) an active revenue source for your company.
  3. Step #3: Only after the first and second steps are complete is it time to hold the disclosure meeting to discuss the current technology and the current implementations.

In following these three steps, I can develop assets that act as a foundational platform for your portfolio, fulfilling different roles at different times over the next three to five years.

Considering the Right Audiences

To craft a foundational patent it is very important to create messaging for all your varying audiences, those beyond the in-house counsel and the examiner who are both more relevant to larger corporations than for startups. For startups, I consider the viewpoints and desires of at least five different entities.

AE-Infographic-3The Investor

There are few fortunate startups that are completely funded and not operating in boot-strap mode, which makes your primary audience an investor or their patent attorney. This financially focused audience is looking for opportunities for licenseability and resilience to invalidation claims: two very different concepts.

Team Members

When you hire someone particularly for stock, their primary interest is in the success of the product or technology on which they are basing their livelihood. When a product prototype does not yet exist, the patent application language can become the draw (as with your enthusiasm!). While you may not think this a compelling recruitment tool, I have had the pleasure to work with two exceptional entrepreneurs that utilized their applications in just this manner, proving to a team of highly skilled individuals that they believed in the idea and were willing to invest in protecting it prior to any other efforts.

The Partners

For this audience, I use the term “partners” loosely to include entities that may license your technology for a different vertical. Think noncompetitive uses of the patent. These partners may provide income or assistance to your venture in some fashion but also have an interest in using the technology themselves.

Partners may also include synergistic companies that both they and the startup can benefit from, such as cross-licensing or joint-development of patents. For example, technology at a university where a professor may conduct research can be usable by the company to booster one or more claims about the products, while providing the professor with material for a publication.

Without the patent application on file, working with a university is complicated and can often result in loss of intellectual property rights, particularly in the public university setting. When drafting the application, it is important to understand the noncompetitive uses or alternatively verticals that may benefit from the startups ideas.

The Purchaser

Here I refer to the purchaser of a company not the purchaser of the patent. For this audience, it’s important to draft a patent that will increase the strike price (the valuation of the company), thus heightening the purchaser’s interest. The purchaser is going to first evaluate the revenue, profits, technology, team members and user base. The patents are there to help the purchaser feel that they won’t buy the company just to turn around and end up in a costly price and marketing battle.

The Competitor

Typically this is the Fortune 500 company that is going to weigh the costs of competition to the cost of purchasing. When drafting the patent for this audience, the goal is to turn the competitor into a purchaser. In reality, enforcing a patent is expensive and a startup is more likely to sell or license the rights (to enforce) to another entity rather than to try and do so themselves.

Therefore the goal is to draft a patent that becomes a portfolio that will be expensive and difficult to invalidate, moving the needle on the costs of competition in favor of a purchase offer. This is one of the trickiest parts to drafting a patent and requires the three-step strategy I discussed earlier.

If you don’t plan for the exit event, the patent or patents won’t be there to provide the assist on which every new venture should be counting.

The Key Benefits of Portfolio Planning

In keeping the overall technology objectives and long-term goals in mind, I am able to develop a patent strategy that allows you to grow a portfolio from a single application into suite of assets on a timeline and budget that parallels the typical startup development cycle. This allows the patents to fulfill the required role at the required time, ultimately assisting in attaching a purchaser.