As a U.S. patent attorney, I work with companies of all sizes (including many start-up companies), in the U.S., Europe and elsewhere, helping them file for and obtain U.S. patents. I also help these clients coordinate patent filings worldwide. A question I’m often asked is: are patents worthwhile? As with many types of investments and property rights, the answer is – it depends.
By way of brief background, patents can be considered a contract between an inventor (or the inventor’s employer) and the government. Like most contracts, patents are a two-way street. In exchange for a full disclosure of the invention by the inventor, the government agrees to grant exclusive rights to the inventor/company, but only if certain patentability tests are met.
Specifically, in the U.S., to be patentable an invention must be “useful”, “new” and “non-obvious”. If these tests are met, then the government (through the Patent Office) will grant a patent for the invention, providing the inventor (or the employer) the right to exclude others from making, using, selling, offering to sell and importing the patented invention, for a period of years (usually 20 years from the filing date). The concept is simple – but for the patent right, innovators may not have the proper incentives to invent and publicly disclose their inventions. Thus, society ultimately benefits, because the invention passes into the public domain after the patent term expires. A patent is therefore a means to this end.
So, when is obtaining a patent worthwhile to a start-up company? The answer can depend upon many factors. However, generally speaking, if an employee of a start-up company invents something “useful”, “new” and “non-obvious” (more on the definitions of these terms in future posts), then patent protection may be worthwhile if:
- Having exclusive rights to the underlying invention would have value to the business of the start-up. For example, if the inventive product or technique is core to the start-up’s business, and the start-up would have a significant advantage in the marketplace if patent exclusivity were obtained (and conversely would be disadvantaged if a competitor were to commercialize the patented invention), then pursuing patent protection might make sense. Potential investors often consider whether the start-up has patent protection, or at least pending patent applications, before making an investment; and/or
- The invention can be reverse-engineered, and thus trade secret protection is not an option. If a purchaser of the inventive product, or a user of the inventive service, is able to readily reverse-engineer the invention, then patent protection might make sense (since the invention can’t be kept secret). If the reverse-engineering is not possible (the invention doesn’t “reveal itself” from inspection or use), then trade secret protection may in some cases be the better choice. Of course, a trade secret only has value so long as it can be kept a secret. If a third party develops the invention independently, then trade secret protection is lost (whereas even an independent developer of a patented technology may still be held to infringe the patent); and/or
- The invention is of a type that the patent law considers as “patentable subject matter”. In the U.S., patents are granted for new and non-obvious “processes, machines, manufactures and compositions of matter.” These terms are generally interpreted broadly, and in addition to traditional machines and physical processes, patents are now routinely granted for software, automated business methods, biotechnology, Internet technology, etc. However, recent case law in the U.S. has curtailed the availability of patents on pure business methods and abstract ideas. To be patentable in the U.S., a process must be tied to a particular machine or apparatus, or must transform a particular article into a different thing or state. The European Patent Office requires that the process must be sufficiently technical in nature.
These are just a few factors that a start-up may consider when deciding to pursue patent protection.
Of course, a final factor that should be considered is cost. To obtain patent protection, an inventor/company must actually apply for a patent with the appropriate patent office(s), which typically requires the engagement of a patent attorney, and associated attorney and governmental fees. Like any business decision, a cost/benefit analysis must be performed.
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