Patents and the Quid Pro Quo – How Bad Patents Can Harm A Company

The Quid Pro Quo – How Bad Patents Can Harm A Company

New inventors are often unaware of the quid pro quo that is fundamental to the patent system.

The inventors must show the world their innermost secrets of how to make or use their invention.  In exchange, the government grants a limited right in the form of a patent.

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Getting Patents Fast

Getting Patents Fast.

Most of the major patent offices of the world, including the USPTO, have programs for getting patents fast.  A typical patent may move through the system over several years, and 3-7 years is pretty typical.  However, these expedited programs can get the patent very quickly, sometimes within 9-12 months.

The USPTO has three systems for expediting patents.  The best system is called the Patent Prosecution Highway.  The next preferred system is Track One, and the system called Accelerated Examination is so hopelessly crippled that nobody should ever use it.

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Avoid Wishful Patents

Avoid Wishful Thinking Patents

Many patents are filed with “wishful thinking”.  This occurs when someone wants protection on a product but does not realize what the scope of the invention will actually be.

For example, let’s say a company is making a fully automated, table top ice cream machine.  Consumers will load up the machine with various ingredients, and the machine will process the ingredients into a fabulous frozen dessert.  The CEO usually tells the patent attorney, “I want a patent on this.”  And the patent attorney goes to work.

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Focus on Patent Quality First, Then Quantity

Focus on Patent Quality First, Then Quantity

It has been said that patents are like hyenas.  One hyena can be easily defeated, but not a whole pack.

When doing multi-million dollar patent negotiations, patent quantity is often more important than quality.  A large number of patents, which may be 10 patents in some cases or 100 patents in others, have an air of invincibility.  Maybe a competitor could try to take down one or two patents that might be infringed, but when there are too many patents, the cost equation goes the other way and it is easier to negotiate and settle.

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Startup Company Valuation Goes Up With Patents

Startup Company Valuation Goes Up With Patents

High quality, investment-grade patents can have spectacular impact on a startup’s valuation.  In the early stages of a company, especially when technology risks and market risks abound, the patents may be the most valuable asset the company has.

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Patents Need To Have Real Business Value

Patents need to have real business value.

Patents should align with the business they are designed to protect.  They need to capture the business’s competitive advantage, period.  When they don’t accomplish this, the patents have no meaningful value.

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Patents Have A Multiplying Effect

How Patents Can Have a Multiplying Effect on a Startup Company

Multiplying An Investment With Patents

The best patents are those that multiply an investment and actually generate money on their own.

Some companies have devolved into purely research and development companies that license technology.  The integrated circuit industry has almost completely changed to this model, where integrated circuit chips are designed in house, but the fabrication is done exclusively at third party foundries.

Some companies invested in technologies but make more money licensing their technology to competitors.  Microsoft famously makes more money licensing their patents to Android competitors than it does manufacturing and selling their own mobile phones.

These are some ways the Fortune 100 handle their patent portfolios, and the same principles apply to startups. Read more

Patent Myths

Getting a patent is the beginning, not the end.

The Patent Bar often gives terrible advice for startup CEOs, but we as patent attorneys have a fiduciary duty to advise the client. Many patent attorneys, especially pay-for-services outside counsel, are giving terrible advice that is purely self-serving. Their advice is only designed to put money in their pocket at the expense of their clients, but masquerades by “helping” the company.

The Patent Bar as a responsibility to educate startup companies about WHY to get patents, not just HOW. By focusing only on HOW to get patents, startup companies waste precious time and resources on worthless patents – and they make bad business decisions because they operate on incorrect assumptions.

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Startup Patent Portfolio Roadmap

A Roadmap For A Startup’s Portfolio

A startup’s patent portfolio can be thought of in two distinct patent types: prophetic patents and non-prophetic.  Non-prophetic patents can also be thought of as “data-driven” patents.  Prophetic patents are a necessary evil, but they can be very damaging to a startup when used badly.

Prophetic patents are those that are almost purely forward-looking.  These patents are filed prior to raising funds or at least before going to market.  They are prophetic in the sense that they are guesses about how the technology will work and how the market will adopt the technology.

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