It is arguably one of the most exciting moments for a technology entrepreneur - seeing that invention for the first time. Whether it's a new software program, mechanical device, or a breakthrough biotech discovery, the feeling is always the same. Pure elation. If you're a technology entrepreneur you know what feeling I'm talking about. You spend months, possibly years, working towards this moment. Now that you're here, you're ready to turn this exciting innovation into a business. But before you take that costly leap of putting together a company and going to market, consider one very important step that can save you, and your company, everything you've worked for - the elusive patent.
Who needs it? Many technology companies and entrepreneurs initially feel they don't need, or just can't afford, patent protection at the very initial stages of their business development. "No one else could develop this right now in the exact same way we have," or "It's already protected by trade secret laws," or "It's going to cost a lot of money right now, so we'll wait until the product is making us a profit." The truth is, not filing a patent to protect your proprietary technology could cost a great, great deal more in the end and might even make your company less attractive to investors and business partners.
Companies in a wide variety of technology fields increasingly rely on patents as a key tool to protect their proprietary inventions. For example, companies in the high-tech industry (software, semiconductors, etc.) and the life sciences/biotechnology industry (pharmaceuticals, medical devices, etc.) are spending more and more money on research & development and, thus, are increasingly looking to patents as a mechanism for protecting this expensive investment.
If you're a typical technology startup, you will likely need to find early-stage, mid-stage and, eventually, late-stage investors for capital to continue to fund your research & development and pay the tremendous costs associated with commercializing your products and services, potentially worldwide. Angel investors to venture capitalists are increasingly scrutinizing the adequacy and strength of a company's intellectual property assets as a part of the investor's decision to invest in that company. More than ever, investors are particularly expecting a company to have either filed for patent protection or already have some patents. Another significant ramification of failing to obtain adequate patent protection is that early, mid and late stage investors may place a significantly lower valuation on your company. Thus, taking steps to file for patents, and then eventually obtaining patents, is often a critical and significant step in proving credibility to any kind of investor.
Another major benefit of patent protection is using your patents as a legal mechanism to protect your company's most critical proprietary technology from infringement by competitors and others. Competition is fierce in the high technology and biotech/life sciences industries and your competition may knowingly, or inadvertently, use your proprietary technology in your competitor's goods or services to gain market share. Your patent is often a valuable tool to combat these serious situations and could be a key factor that differentiates your company from your competition, or even provides the life line that keeps your company in business.
Many technology companies, particularly startups, are not in a position to completely commercialize their proprietary technology in every country in the world and in every "field of use" applicable to that proprietary technology. So, technology companies are often searching for competent parties who can be given a license to manufacture products, or perform services, that utilize the proprietary technology in a particular geographic area, in a specific "field of use", or both. Potential licensees, however, will increasingly scrutinize the level of patent protection given to your proprietary technology before they commit to being a licensee. The main reason for this increased scrutiny is that the potential licensee will ultimately need to spend more money to further develop your invention (into a final product or service) and to develop the costly infrastructure needed to efficiently manufacture and/or distribute a final product or service that uses your technology. Thus, a potential licensee wants to make sure your technology is adequately protected before the licensee is willing to make this tremendous investment to commercialize your technology. So, taking steps to file for patent protection can increase your company's ability to find proper licensees. Patent protection can also increase your negotiating leverage when entering into contracts with licensees and could have a significant impact on the level of royalties and other compensation that licensees agree to pay you for the use of your proprietary technology. Indeed, potential licensees who still want rights to your technology very often negotiate significantly lower royalty payments if you have failed to obtain proper patent protection because the licensee deems your technology to simply be unprotected "trade secrets." As a bottom line, taking steps to obtain proper patent protection can potentially increase the revenue stream to your company from others that want to use your technology.
There is no denying that it can be costly to file for patent protection. But protecting your patent rights is often a valuable investment in your company's future. With proper patent protection, you can head into the technology marketplace with a leg up, securing your business' long-term prospects, and ensuring that all of your hard work doesn't go to waste.