As a patent attorney with over 20 years working with startups from launch to IPO, my conclusion is that IP and patents can be valuable assets for a company because they can provide a competitive advantage, generate revenue, build brand recognition, create barriers to entry, provide legal protection, protect innovation, and attract investment which all contribute to increase a company’s valuation.
Patents can protect the business idea from copyists for 20 years and are, therefore, provides a clear competitive advantage for startups. Read more below on how to show investors of the values of patent protection.
Why startups need patent protection
Startups may need patents for a number of reasons, some of which include:
- Competitive advantage: Patents can provide a startup with a competitive advantage in the market by giving the startup exclusive rights to use its technology. This can help the startup protect its market position and increase revenue.
- Attracting investment: Patents can be a major factor in attracting investors, especially for technology-based startups. Investors are often interested in startups that have a strong patent portfolio, as it can provide a competitive advantage and protect the startup’s technology.
- Licensing opportunities: Patents can also be used to generate revenue through licensing agreements. This can help the startup diversify its revenue streams and increase its valuation.
- Barriers to entry: Patents can create barriers to entry for competitors, which can help the startup maintain its market position and increase its valuation.
- Legal protection: Patents can provide legal protection for the startup’s technology, which can help it avoid costly legal disputes and protect its revenue streams.
- Innovation: Patents can also help startups protect their intellectual property on new products, services, software, process, design, and any other innovation that can be protected by patent laws.
Overall, patents can be an important tool for startups to protect their technology and gain a competitive advantage in the market, attract investment, generate revenue through licensing, create barriers to entry, provide legal protection and protect innovation, which are all crucial elements for the success of a startup.
How to Show Case the value of your patents to investors
Discussing the valuation increase from a patent portfolio with investors can be an important step in securing funding for a company. Here are a few tips for discussing the value of a patent portfolio with investors:
- Highlight the competitive advantage: Explain how the patent portfolio provides a competitive advantage in the market and how it can help the company increase revenue and profits.
- Show the potential for licensing revenue: Discuss the potential for generating revenue through licensing agreements and how it can help diversify the company’s revenue streams.
- Emphasize the legal protection: Explain how the patent portfolio can provide legal protection for the company’s technology and help avoid costly legal disputes.
- Describe the barriers to entry: Explain how the patent portfolio can create barriers to entry for competitors, which can help the company maintain its market position and increase its valuation.
- Provide examples of similar companies: Provide examples of similar companies that have been successful in generating revenue and increasing their valuation through their patent portfolios.
- Present a plan: Present a clear and detailed plan for how the company will use the patent portfolio to increase its valuation, including steps for monetizing the patents, protecting and enforcing the patent portfolio and expanding the patent portfolio.
- Be transparent and clear: Be transparent and clear about the details of the patent portfolio and the company’s strategy for monetizing it.
Overall, discussing the value of a patent portfolio with investors requires highlighting the competitive advantage, the potential for licensing revenue, the legal protection, barriers to entry and providing examples and a plan of how the company will use the patent portfolio to increase its valuation. Transparency and clear communication will help build trust with the investors.
Advantages of early Patent filing
Filing patents early on can enable a company to have frank discussions with investors and suppliers without fear of losing their intellectual property, even if they don’t sign non-disclosure agreements (NDAs). Here are a few reasons why filing patents early on can be beneficial:
- Legal protection: Filing patents early on can provide legal protection for the company’s technology, which can help it avoid costly legal disputes and protect its revenue streams. This can give the company more confidence to share information with potential investors and suppliers without fear of losing their intellectual property.
- Competitive advantage: Patents can provide a company with a competitive advantage in the market by giving the company exclusive rights to use its technology. This can help the company protect its market position and increase revenue, which can be attractive to investors.
- Attracting investment: Patents can be a major factor in attracting investors, especially for technology-based startups. Having a strong patent portfolio can provide a competitive advantage and protect the startup’s technology, which can be attractive to investors.
- Licensing opportunities: Patents can also be used to generate revenue through licensing agreements. This can help the company diversify its revenue streams and increase its valuation, which can be attractive to investors.
- Barriers to entry: Patents can create barriers to entry for competitors, which can help the company maintain its market position and increase its valuation, which can be attractive to investors.
Overall, filing patents early on can provide legal protection, competitive advantage, attract investments, create licensing opportunities and barriers to entry that can increase the company’s valuation and allow the company to have frank discussions with investors and suppliers without fear of losing their intellectual property, even if they don’t sign NDAs.
Criteria for patent protection
Identifying startup inventions to patent can be a crucial step in protecting a company’s intellectual property and increasing its valuation. Here are a few tips for identifying inventions to patent:
- Evaluate the market: Research the market to identify potential areas of growth and opportunity. Look for areas where there is a gap in the market or where a new technology or product could disrupt the current market.
- Assess the company’s unique capabilities: Evaluate the company’s unique capabilities and expertise. Identify any proprietary technologies, processes, or methods that the company has developed that could be protected by patents.
- Review the company’s research and development: Review the company’s research and development activities to identify any new inventions or innovations that have been developed.
- Identify the company’s core competencies: Identify the company’s core competencies and technologies that are critical to its success. These are the areas where the company has a competitive advantage and where patents can provide the most protection.
- Consult with experts: Consult with experts such as patent attorneys or agents to help identify potential patentable inventions and to advise on the patentability and scope of the invention.
- Prioritize the inventions: Prioritize the inventions based on their potential for commercial success, their potential to provide a competitive advantage, and the cost of patenting them.
- Consider the international market: Consider whether the invention has potential for international market and whether it’s worth to file patents internationally.
Overall, identifying inventions to patent for a startup requires evaluating the market, assessing the company’s unique capabilities, reviewing the company’s research and development, identifying the company’s core competencies, consulting with experts, prioritizing the inventions and considering the international market.
There are three criteria that a product should have to maximize patent protection:
- The novelty of the invention: The product may not belong to the current state of the art on the patent’s filing date. This also means that the invention has not yet been publicly presented or used for patent application.
- The inventive step: An inventive step is only given if it is not apparent to the “average person skilled in the art” in the respective field and exceeds their ability. In this case, one speaks of the so-called “inventive step”.
- Commercial applicability: An invention is commercially applicable if it can be used commercially in any field – in principle, it is about the practical use of the invention and whether a business model can be derived from it.
Patent protection can be fundamentally pursued with consultation and the representation of legal experts. In California, the PatentPC specializes in every domain that covers Intellectual Property. It means the legal matters involving patents, trademarks, trade secrets, and copyright cases.
The legal firm has broad services relevant to patent protection, filing trademarks, contesting unfair competition, protecting trade secrets, and the copyright law. Its diverse portfolio of clients allows the firm to represent clients varying in a wide array of business sectors.
Patent PC also professes a strong company culture and also deals with clients who operate on a stringent budget. Startups are required to file patents protecting intellectual properties and prototypes, which is the firm has a pool of clients ranging from many startups to the big players.
Scaling investments: For technology-oriented startups and medium-sized companies, patents are an essential starting point for starting a business, finding investors, or opening up a new market.
Ideally, innovative companies first patent the core development and then protect all purposes from calmly rolling up the global market. Patent law gives applicants several options for scaling the timing and amount of investment in property rights. It is usually advisable to proceed in stages and at the same time to select the scope of protection skillfully.
Disclose selectively: Companies should protect innovative technical processes and products very strategically. Inventors, founders, and patent experts have to plan precisely what is specifically described in a patent specification and thus disclosed to competitors – and what the startup would prefer to keep secret.
For products in which software plays a central role, it should be considered whether patent protection is only sought for the parts that ensure good, but not optimal, function. Only a subsystem is then disclosed to the competitors when they register. The real highlight, however, remains hidden from them.
Appropriate patenting: Certain technical developments, such as chemical compounds, can best be protected by so-called material protection. If this succeeds, startups can slow down competitors at almost every stage of the value chain. Building a patent thicket with which your products and any workaround solutions can be protected can be a worthwhile long-term strategy.
Protect according to standards: Patents are beneficial when they protect standardized products. Even if such standard-essential patents are subject to some restrictions in terms of enforcement, all standard users must pay license fees to the patent holders. Considerable income can be generated from a large number of users.
The ideas not taken into account in the standard and the patents based on them, on the other hand, are left empty. If standardization projects for innovative products are foreseeable, startups should closely coordinate their participation with patent granting for the products.
Companies in the mobile communications and e-mobility industries are pursuing this strategy, in some cases with great economic success. Negotiations are held in front of a standards institute, for example, which standardized plug shape should enable future electric fuel pumps.
Simultaneously, the participants in the standardization negotiations bring themselves into position with applications for property rights on various connector shapes and additional features.
Make the right choice: You can save a lot of money when choosing the countries in which an invention is protected. A subtlety of patent law also allows the country selected to be expanded gradually.
Startups with software inventions should also consider obtaining protection in the USA. There you will find not only a large software and investor market but also very patent-friendly conditions for your products. Young companies that have applied for a patent on their invention are exciting for investors. However, there are a few things to consider when it comes to patents — both in terms of the application process and costs of application.
Cost Management of the IP portfolio
Building a great IP portfolio can be a costly endeavor, but there are ways to control costs while still building a strong portfolio. Here are a few tips for controlling costs while building a great IP portfolio:
- Prioritize your patents: Prioritize which patents are most important to your business and focus on those first. This can help you control costs by only pursuing the patents that are most critical to your business.
- Conduct a thorough search: Conduct a thorough search of existing patents and trademarks before filing a new application. This can help you avoid costly legal disputes and ensure that your patents are not already taken.
- Use provisional patents: Consider using provisional patents to protect your inventions while you are still in the development stage. This can help you control costs while still providing legal protection for your inventions.
- Utilize the services of patent agents: Utilize the services of patent agents who can provide cost-effective solutions for preparing, filing, and prosecuting patent applications.
- Choose cost-effective countries for filing patents: Consider filing patents in countries with lower costs for filing and maintenance, such as Mexico or Canada, in addition to the US, to control costs.
- Use a self-filing process: Consider using a self-filing process, where the company files its own patent application, instead of hiring a patent attorney. This can help control costs, but it’s important to have a good understanding of the process and the law.
- Monitor your portfolio: Regularly monitor your portfolio and consider abandoning patents that no longer have any value to your business, this will help control costs in the long run.
Use Computer Aided Software to control Cost
Computer-aided patent software tools such as PowerPatent can be useful in controlling costs and increasing patent quality when building an IP portfolio. Here are a few ways that computer-aided patent software tools can help:
- Patent searching: Patent searching software can help you conduct a thorough search of existing patents and trademarks before filing a new application. This can help you avoid costly legal disputes and ensure that your patents are not already taken.
- Prior art analysis: Computer-aided patent software tools can also assist with prior art analysis, which can help you identify and evaluate prior art that may be relevant to your patent application.
- Claim drafting: Some computer-aided patent software tools can assist with claim drafting, which can help you draft claims that are clear, concise, and more likely to be granted by the patent office.
- Portfolio management: Computer-aided patent software tools can also assist with portfolio management, which can help you organize, track and monitor your patent portfolio.
- Cost-effective: By using computer-aided patent software tools, you can save time and money, as they are often less expensive than hiring a patent attorney, and can help you complete tasks more efficiently and effectively.
- Quality: Computer-aided patent software tools can also help increase the quality of the patent application and increase the chances of grant by the patent office.
Overall, computer-aided patent software tools can be useful in controlling costs and increasing patent quality when building an IP portfolio. They can help with patent searching, prior art analysis, claim drafting, portfolio management and be cost-effective and help increase patent quality.