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“Patents are a company’s crown jewels,” says Carina Tan of Reed Smith. "They deserve the same level of security that Queen Elizabeth installed in the Tower of London.” But, all too often in the excitement of starting a company, founders talk about how clever they are and how great their new product is, when it’s probably better not to do that without first having a non-disclosure agreement in place. As a patent attorney who helps companies design and build IP assets, Carina sees myriad patent issues.
It is not uncommon for someone to listen to an inventor expound, then sometime later incorporate those very ideas into their brain to the point where they believe they have invented this wondrous thing that their friend told them about. The listener proceeds to file a patent for the other’s idea, couched in different language.
There are many different ways to protect your intellectual property. They include domestic utility and design patents, international patents, branding, logos, trademarks, trade dress and marketing in all its forms. All of which maximize the value of your product and company.
Anyone can file a patent, but for something that has huge potential value, it’s probably not a great DIY project. Carina has seen patent descriptions where the person has written in that he’s “not quite sure it’s going to work.” This is guaranteed to cause problems for the application.
For those determine to do it themselves, the US Patent website has lots of useful information. Nolo Press also has some very informative books that will guide you through the process. Or you can start with a talented lawyer. Like corporate lawyers, you don’t want to hire the guy who’s working out of the extra bedroom (see Love your lawyer). Carina provides an outline to help inventors write the patent description that helps keep the costs down. Then she’ll make sure it’s complete and ready for submission.
The patent process needs to be carefully planned. Once you start, you have 30 months to complete it. If you falter along the way, that’s it. You can’t restart or ask for a deferral. You will be seriously screwed on the most important aspect of your future success. You need to know what the fees are (these are filing fees, not attorney fees) and be sure you will be able to pay them when the time comes. If you are only filing in the US, the government fees are fairly cheap at about $500. If you are going international, this process starts with a Patent Cooperation Treaty (PCT) with filing fees at about $5,000.
After you get approval from the Patent Cooperation Treaty folks, you can file for patents in the countries you think will either be major competitors or major markets. The fees vary according to country.
For example, an EU patent costs about $15,000 but you also have to pay your EU annuities (taxes) up front. Of course it’s not possible to know exactly how much you will sell so, depending on the product, they will figure out a base fee that will be in the thousands of Euros. The international patent fees and annuities can get up into the hundreds of thousands. Be prepared to pay these fees within two and a half years from the initial filing.
If you have a company that will rival Facebook then you must get a good patent attorney. Facebook had 56 patents, but filed another 418 when they started working toward the IPO. They’ve also bought some patents to beef up their IP portfolio. Apple, on the other hand, has thousand of patents right down to the number and placement of the screws that holds the iPhone together that no one will ever see.
Protecting your patents after they are filed is messy and expensive. According to press reports, Yahoo has already filed up to 20 patents on technology that Facebook is allegedly using. On top of that, it is alleged that Amazon filed patents on some of Facebook’s most important technology seven years before Facebook was launched. It will be interesting to see if Amazon or Yahoo takes exception to Facebook’s alleged infringement. It could either make or break Facebook.
Meanwhile, in Germany, some guy is cruising websites of interesting American startups to find ones he can profitably imitate – this doesn’t mean inspiration to create – this is flat out copying down to the look-and-feel of the websites. He liked Airbnb, so he set up his own. The results of the ensuing lawsuit: German courts said Airbnb had no case so perhaps they didn’t have international patents, but I suspect it would have made no difference; they won in US courts but the terms were kept secret. Now Airbnb is working with these guys.
It’s pathetic that there is so little creativity in Europe when they are in desperate need of wealth creation, but like the Chinese, they are apparently great at copying and their courts don’t think that IP infringement is important. (see my earlier post No place like home).
Whether or not it’s worth getting international patents is probably a discussion you should have with an experienced lawyer. I have yet to find any consensus on their value. Firing off an infringement lawsuit costs about $3M in the US, and more abroad. Large companies like Apple and Amazon are constantly in court fighting over IP – both IP they’ve infringed upon and their IP that others borrowed.
Like democracy, the patent protection laws are not perfect but they are the best we’ve got.
Oh, and did I mention that I’d like the red trade dress? It will be smashing with the crown jewels.
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Priscilla Burgess is CEO, Co-founder, and Co-inventor of Bellwether Materials, an award-winning, triple-bottom line company that manufactures deep green building insulation made from an agricultural by-product. Before founding Bellwether Materials, she ran her own management consulting business. She has traveled all over the world, asking questions about how people work and from that, has developed several models and many opinions about the best way to grow a flourishing business.
image: Open Source Way, Open Source Way via Flickr cc (some rights reserved)