Credit: this post was inspired by a LinkedIn Post by Tim Taylor, a Patent Attorney at Garlick & Markison
Deciding whether or not to pursue a patent for your invention can be a daunting task. Founders often struggle to determine the necessity of a patent, especially when they have limited experience in building or monetizing a patent portfolio.
In this post, we’ll explore the different perspectives of individual inventors, startups, SMEs, and large corporates when it comes to patenting, focusing on the potential value of inventions and the ability of competitors to reverse engineer them. We’ll also discuss the major risks of not obtaining a patent, such as losing market share and the ability to monetize the invention through licensing, sales, infringement, and more.
Assessing the Need for a Patent
According to Tim Taylor, a Patent Attorney at Garlick and Markison, to determine if you need a patent, ask yourself two questions: 1. “How much of a market differentiator is your technology?” and 2. “How many business problems does your technology solve?”
1. Market Differentiator
If your technology is a significant market differentiator, it’s more likely that there are numerous patentable inventions worth protecting. For instance, if you’ve invented a groundbreaking technology that disrupts an entire market, obtaining a patent is highly recommended. However, if your invention is a minor improvement to an existing product, it might not be worth the investment.
Don’t make the mistake of thinking that only a quantum-leap in technology should be patented. Continuous improvements that increase efficiency for the producer or create value for the consumer can add up over time in high volume products and services. Assess the value of the invention in terms of how much cost it can save or how much revenue it can generate over the near and long term. If its greater than the approximately $50,000 it costs to get a patent in the United States, it is likely worth the investment.
2. Problem-solving Capability
The more problems your business can solve using your technology, the more important it is to consider patent protection. This provides leverage in the market and creates an asset that can boost your business valuation in various ways.
Not all business problems are obvious. Many industries rely on the status quo for decades until disruptive technology comes along and shakes things up. Look at your invention from the perspective of competitors and customers. If your competitors are likely to copy your invention as soon as they learn about it, you should get a patent. If customers are more likely to buy into your invention than alternatives, a patent will give you a temporary monopoly.
Reverse Engineering and Business Valuation
If a competitor can easily reverse engineer your technology, your business valuation may be limited to the value of your business operations and the cost of reverse engineering. On the other hand, if your technology is protected by a comprehensive patent portfolio, the overall business value not only includes the value of your operations, but also takes into account the market impact of your technology and the strength of your patent protection. This can greatly enhance your overall business valuation and provide a significant competitive advantage.
“It comes down to protecting your tech. If a competitor can reverse engineer your tech for “x” amount of dollars, then your overall business valuation is roughly only your business operations value, which is typically 3-10x of 12 month revenue, + x.”Tim D. Taylor, Garlick & Markison
If your invention could never be reverse engineered, it may be a better candidate for trade secret protection. Trade secrets, unlike patents, never expire and are never published – as long as you go to reasonable lengths to keep them secret.
Tailoring Patent Strategies for Different Perspectives
The decision to pursue patents, how many, and when, can vary greatly depending on whether you are an individual inventor, a startup, an SME, or a large corporation. Each group has unique concerns and goals that should be considered when developing a patent strategy.
Individual inventors typically have limited resources and may struggle to justify the costs associated with obtaining a patent. In this case, it is crucial to focus on the most valuable and market-disruptive aspects of the invention. Individual inventors should also explore alternative funding sources or partnerships to help cover patent costs.
Startups often operate with limited budgets and need to prioritize their resources. Obtaining patents can be a strategic move to attract investors and protect the core technology that drives the business. Startups should focus on securing patents for key innovations that differentiate them in the market and provide a competitive advantage.
SMEs (Small and Medium Enterprises)
For SMEs, the decision to obtain patents should be based on a thorough analysis of the market landscape, the competitive environment, and the potential return on investment. SMEs may already have an established market presence and should focus on securing patents for innovations that help maintain or expand their market share. Additionally, SMEs should consider the potential of licensing their patented technology to generate additional revenue.
Large corporations typically have the resources to invest in a comprehensive patent portfolio. These companies should focus on protecting their core technologies, as well as any innovations that have the potential to disrupt markets or create new revenue streams. For large corporates, maintaining a strong patent portfolio is not only important for protecting market share, but also for leveraging their intellectual property in negotiations, cross-licensing agreements, and potential acquisitions.
For large corporations, risk mitigation can be a significant driver for seeking patent protection. By securing patents for their core technologies and innovations, these companies can proactively prevent competitors from encroaching on their market share and diluting their brand value. A comprehensive patent portfolio serves as a strong deterrent against potential infringement, as it demonstrates the company’s commitment to protecting its intellectual property.
One of the primary motivations for large corporations to obtain patents is to maintain their freedom to operate and ensure that their market offerings cannot be instantly blocked or challenged by another company’s patents. This not only safeguards their market position but also helps to prevent costly and time-consuming legal disputes. While this should be a concern for smaller companies as well, it becomes an even more significant risk for large corporations, which typically have deeper pockets and substantial revenues that could be severely impacted by a preliminary injunction. By proactively securing patent protection, large corporations can effectively mitigate these risks and maintain a competitive edge in their respective industries.
Ultimately, the decision to pursue patents, and the extent of patent protection, should be carefully considered based on the unique needs and concerns of individual inventors, startups, SMEs, and large corporations. Developing a tailored patent strategy can help maximize the potential value of intellectual property, protect market share, and increase overall business valuation.
Building a Patent Portfolio
There are many unique and smart approaches to building a patent portfolio aligned with your business goals.
“One way is to structure the relationship between the patent practitioners and the business such that business has less upfront costs, and the patent practitioners have interests (e.g., equity, stock, etc.) aligned with the business. This creates an environment where everyone is working together to maximize the business valuation.”Tim D. Taylor, Garlick & Markison
If your budget allows, you can combine strategic intellectual property consulting with an invention and innovation firm like ipCapital Group alongside world-class attorneys. This will ensure you get the most value out of your invention. You’ll have a more robust portfolio of patents applications that are likely to grant quickly and be defensible and valid if a copycat threatens your market share.
Should I Get a Patent?
Deciding whether or not to pursue a patent can be a complex process, especially for those with limited experience. By evaluating the market differentiator factor and problem-solving capability of your technology, as well as considering the potential for reverse engineering, you can better assess the need for patent protection. Building a strong patent portfolio can significantly increase your business valuation and provide a competitive edge in the market.