Your First Patent Is Not Your Best Patent
This is a transcript from a section of the course “Patents 340 – Invention Rating Checklist,” which is available here at IP.Education.
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The First Patent Is Usually Not The Best Patent
The story of the HP handheld scanner is a good example of one of my theories about inventing, patents, and protecting a business.
Often times, the first patent is NOT the most valuable one in the portfolio.
The first patent is always the highest risk patent. There is nothing we can do about that.
At the time of invention, we don’t usually know if the product will work and that the customer will buy it.
We might have a prototype in a lab, a minimum viable product, or some kind of mock up, but there are always problems that pop up as we bring a product to market.
We might have tested your software product with 100 users, but it might break at 100,000 users.
Will our backend architecture handle the volume? How will we have to improve or change the product?
We have a working prototype in the lab, but what problems will we encounter when we scale production to 1,000,000 units per year?
Will we have assembly problems? Can we buy enough raw material? Will supply chain problems cause us to redesign?
As we scale the product, we will have to solve problems on the way to our vision.
These problems that we solve are also problems that our competitors will have to solve.
If we can control that solution, we can often control the entire marketplace.
In HP’s example of the handheld scanner, they had to solve a tracking problem so they developed a non-contact sensor.
Every competitor would also have to sense where the scanner was moving over the page.
By controlling the sensor, HP can control the entire market.
The second or third patent come as you learn about the technology and the market.
The more you learn, the less risky the patents become. This is just a fact.
For startup companies, I often don’t invest in the first patent.
Not only is the first patent risky because we don’t know the technology risks or the market risks, but the startup company is very likely to pivot once they encounter problems.
I prefer to invest in the second, third, or fourth patent.
These have a lot of the risk removed, not only because the company has been around long enough to have two or three patents, but mostly because they know a lot more.
They know their technology better, but even more importantly, they know their market better.
As an investor, this helps me de-risk the investment.
One other thing while I am on the topic:
I generally advise companies to do a rather narrow patent for their first one.
It is common advice for patent attorneys to put as much stuff as possible in every application.
This is great for the patent attorneys, since it turns into a huge recurring revenue for them, but it is often harmful for the startup companies.
In an earlier topic, we talked about the quid pro quo or the exchange we make with the government.
We exchange our trade secrets for a patent.
But many times, that exchange does not go in the favor of the company.
You give up too much and get too little in the bargain.
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