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Patent strategy for startups

Confidential information, or trade secrets, gain much of their value from remaining undisclosed. It was recognized long ago, however, that society would benefit if some types of confidential information were disclosed and could be used by the public. The patent system was created to enable disclosure and use of inventions, while protecting the rights of the patent holder to exploit the invention for a limited time period.

A patent is an exclusive right to prevent others from making (or having made), using, offering for sale or selling a patented invention in the jurisdiction that grants the patent. For utility patents, in the US, Canada, and many other jurisdictions, this right has a life of 20 years from the date that the patent application is filed. In the US, design patents have a term of 14 years from the date of issuance. In other words, if a particular invention qualifies for patent protection, the country will give the inventor the right to control its use for a limited period of time.

After this time period, the invention may be used by anyone. An inventor or an assignee of the inventor may apply for a patent. The first person to file an application for an invention is entitled, with certain qualifications, to the grant of a patent. The US used to be a first-to-invent system, but for patents filed on or after March 16, 2013, the US is now a first-to-file system like much of the rest of the world.

What is a patentable invention?

An invention is defined as any new and useful art, process, machine, manufacture or composition of matter or any new and useful improvement thereof. To be patentable, the invention must be novel and not have been obvious to a person skilled in the art or the science to which the invention relates. It must also have some utility or real world value (that is, it has to be more than just an abstract idea, mathematical equation or concept). Finally, the invention must not have been disclosed to the public before the application is filed. Notwithstanding this bar on public disclosure, both the US and Canada provide for a grace period where an inventor can still file a patent application within one year of public disclosure. Such disclosure, however, will prevent patentability in most other countries.

Why seek patent protection?

There are a variety of reasons for seeking patent protection for an invention. They include:

  • To protect the businesses’ ability to manufacture and/or sell a core product or service
  • To inhibit competition
  • To create alternative sources of revenue (e.g., licensing)
  • As insurance against infringement claims (e.g., cross-licensing)
  • To add value to a business when seeking financing or negotiating the sale of the business

What rights does a patent confer?

A patent confers on the owner the right to exclude others from making, using, offering for sale, selling and importing the invention. The scope of the rights conferred by a patent is defined by the claims of a patent. That means that owning a patent does not necessarily provide the owner with the right to make a product, but rather allows the owner to preclude others from making a particular product. By filing a patent application, it is possible to preempt others from covering the same or similar invention with their own patent, as long as you are the first to file. Therefore, as a defensive strategy, it often makes sense to file patent applications for the sole purpose of preventing others from obtaining patents covering certain products and technologies, thus limiting their ability to obtain patents that could preclude you from entering the marketplace.

Which inventions are worth patenting?

Patenting takes time and money, so it is important to have a method to decide when to seek patent protection for a particular invention. This should include how to identify patentable inventions before they are disclosed to the public, as well as how a patent for that invention would be used by, and add value to, the business. Consider what other forms of protection are available for the invention, such as trade secret protection or copyright protection, and whether those other forms would be equally effective.

What are some common patenting strategies?

A few of the common patent strategies include:

The sniper strategy

The sniper strategy involves securing a few patents to cover core technology, but not attempting to protect modifications or improvements to the technology. This strategy is typically used by businesses with limited resources. The main risk of the sniper approach is that competitors may anticipate improvements to the core patents, patent those improvements, and then lock your business out of the market or attempt to extract license fees.

The shotgun strategy

A second strategy is to try to obtain as many patents as possible in a particular area. The goals of this strategy are to make it difficult for others to operate in the same area and to prevent others from blocking the company’s growth and expansion of its business. Cost is the obvious drawback of this approach.

The family tree strategy

Another strategy is to first seek patents to protect the corporation’s core technology. As the core technology evolves, it will often branch out into various related fields—hence the family tree analogy. Each branch is then evaluated in order to determine if additional protection is required.

When should you file a patent application?

The first option is to file a patent application as soon as possible in order to secure the priority date and in order to have the patent issued as soon as possible. A second option is to keep the invention a secret and to treat it as confidential information until the commercial viability of the invention is better known. One of the risks of delay is that a competitor could independently conceive of the same invention and file a patent application before your application is filed. A third option is to file a partial patent application.

Should you file for a provisional/partial patent application?

When time and/or money are scarce, consider making a provisional patent application. A provisional patent application (known in some jurisdictions as a partial patent application) is a less costly interim step in the patent application process. The application requires only a description of the invention without the need for an extensive set of claims, capturing all possible embodiments that are known to the inventors, or payment of search, publication and examination fees. Once filed, the applicant will obtain an application number and a filing date which can eventually be used as a priority date. The regular or complete application must be drafted and filed within twelve months from the filing date of the provisional application in order to benefit from the earlier filing date.

Provisional patent applications are not risk free. For example, applicants will generally only be able to obtain a patent for claims that are covered by the general description contained in the provisional application. As a result, innovations that are developed after filing of the provisional application and innovations that were developed before the filing date of the provisional application and that are not contained in the invention description will not benefit from the early priority date. In addition, if innovations are disclosed to the public, and a new application regarding such innovations is not made within the applicable time period, the ability to obtain patent protection for the latest innovations will be lost.

Where should you file your patent?

The rights granted to patent holders are limited to the country in which the patent is issued. For this reason, inventors must determine which countries to prioritize for patent protection. For US and Canadian technology companies, the most obvious countries are the US and Canada. Other territories commonly considered include the United Kingdom, Europe and Asia.

Since it can be difficult to guess which countries will warmly receive a new product, many companies will file their patent applications pursuant to the Patent Cooperation Treaty (PCT). Under the PCT, a national or resident of a contracting state may file an “international” application which sets out those contracting states in which it wishes the application to have effect. The effect of the international application in each designated state is the same as if a national patent application had been filed with the national patent office of that state. This process effectively buys the applicant more time (approximately eight to 18 additional months) to reflect on the decision of whether to file an application in a contracting state. Within a certain pre-set period of time, an application must be filed in each country in which protection is sought, (known as a national stage patent application) and will require the payment of separate fees for each country in which a national stage patent application is filed.

 

Questions? Email us at startups@dentons.com.