January 10, 2018

Five Common Myths about Utility Patents for Start-ups

By Christopher M. Cauble, Principal

1. As a start-up, utility patents are not worth the investment.

While it is true that utility patents are expensive — costing up to $25,000 and about $10,000 on average — not having patent protection can end up costing your business a lot more. If you are willing to base your entire company around one or two ideas, but those ideas are not patented, then the backbone for your business is up for grabs. And because no good deed goes unpunished, that company might just invite you to court for infringing their patent.

From Shark Tank to angel investors to venture capital firms, a utility patent is still the premier credential that investors use to evaluate your technology. A utility patent application helps block competitors who are close on your heels and gives you something to trade with competitors who might be ahead of you. It further protects your business against defecting employees and contractors.

2. By the time my invention is granted patent protection, the invention will be obsolete.

It generally takes up to three years for a patent to issue, although average pendency of an application is down to about two years. Patent owners are granted some rights prior to issuance of a patent, however. The patent system requires utility patent applications to be publicly published 18 months after they are filed. If a patent is infringed during the time period between publication and issuance, the patent owner can sue the infringer for damages once it is actually issued. Upon issuance, anyone who infringes a patent claim is subject to infringement suits and litigation.

Additionally, while a patent application is pending, the applicant can and should mark the invention “patent pending.” Marking the invention “patent pending” does not give the applicant any additional legal rights (because patent protection does not begin until a patent issues), but marking has an important practical effect of deterring competitors.

3. I can wait until after I’ve launched my product and seen success in the marketplace to file for patent protection.

For more than five years now, the U.S. has been operating on a first-to-file patent system, where the first applicant is entitled to the patent even if he or she is not the first inventor. Any delay in filing can therefore result in the loss of rights. While risky, you can wait to file a patent application as long as you file less than one year from when you first disclosed the invention or put it on sale. Disclosure or sale of your product can prevent you from getting a patent later.

In short, an application must be filed within one year of the first public use, sale, or offer for sale of the invention, or any patent issuing on the application can be subject to an invalidity challenge. This one-year period allows the inventor to fine-tune the invention and perform some market testing before deciding whether to file a patent application. There is no room for negotiation once this one-year window closes.

4. If I am first to market, I can generate enough good will to fend off larger competitors.

The internet is full of examples where this is not the case: browsers, search engines, PCs taking market share from Apple, Apple taking back market share from PCs, Myspace versus Facebook, Groupon, and more. Just because you have the first product on the market does not mean consumers will always want it.

Protecting your ideas with patents can create an enforceable barrier that makes it difficult for competitors to enter your space. Remember, the first to market is not always the eventual market leader – Hydrox cookies beat Oreos to market by four years, for example. Patents can help you keep the advantage gained by your head start.

5. My start-up owns whatever ideas are developed by my employees or contractors; they can’t use the ideas to compete with me.

At the intersection of IP and employment law in the U.S., it is generally presumed that the inventor, not the employer, owns inventions — even those relating to the business. There are exceptions: if the employee is specifically assigned the job of invention (which can be difficult to prove), or if there is a written agreement with the employee that specifies ownership.

Having a good employee agreement will help you protect your confidential information and own your company’s technology, preventing an ex-employee (or even a disgruntled founder) from starting a competing business using identical technology.