Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
It’s an important decision because there are knock-off artists around every corner. Yet patents do not come cheap.
Patents generally cost more than $10,000 to file, and an equal amount over time to get issued. If you need to get foreign coverage for your invention, that can add another substantial figure to your cost.
Of course, there are no black-and-white answers. And stories abound on both sides of the equation.
Most entrepreneurs have heard about or know someone who should have obtained a patent, but didn’t, and had their ideas stolen by a larger competitor. It’s also impossible to avoid the stories about entrepreneurs who got patents and sued on them, but came away with nothing.
In truth, patents are an expensive, long-term investment for your business, and the decision about whether to secure a patent has many factors, just like any other investment. Below are some of the most important issues you should consider.
Timing’s everything
You’ve heard the saying “timing is everything” – this is particularly true with patents. If you’ve already made your invention public, it is too late to file for patent protection in most of the world. However, the United States gives companies one year after they’ve publicized or commercialized an invention to file for patent protection.
The good news is that for most small companies, U.S. protection is often enough. The law in this area has many complicated nuances, so it is important to talk to a qualified patent attorney before giving up on filing. Sometimes there are creative ways around the timing issue.
Got leverage?
How critical is the invention to your business and how essential will it be to your likely competitors? If the invention is a differentiator for your salespeople or provides substantial cost savings, then seek a patent.
The key for smaller businesses that don’t have deep pockets is to patent important innovations, but let your bigger competitors get a million patents on tiny improvements. You should focus your efforts on your most cutting-edge developments and spend your money on quality rather than quantity.
Is it visible?
If your invention is not publicly discernable (for example, if it operates inside your closed factory, or if it is an electronic component or piece of software in a black box that cannot be reverse-engineered), there are two reasons you may not want to get a patent.
First, you can keep the invention as a trade secret (assuming your departing employees are ethical), and you won’t have to worry about publicizing your invention and then policing your rights (which you must do with a patent).
Second, if the invention cannot be discerned, you are going to have a difficult time finding any infringers (even if they are infringing) because they won’t let you into their factory any more than you’ll let them in yours. If that were to happen, you could end up with an effectively unenforceable patent.
However, there is one note of warning here. If you keep an invention secret, a competitor can patent it and then sue you and shut you down, even if you invented it long before. So despite the good reasons not to get a patent in these situations, the mere threat of this can be reason enough to seek a patent. Again, this is tricky, so talk to a competent patent lawyer.
Barriers to entry are another factor. If you can establish other substantial barriers to your competition, you may want to skip the patents. For example, if you can establish a reputation and related trademark, you can keep out knock-off artists. The same is true if you can keep innovating and stay ahead of the competition.
Of course, both of these actions take a lot of hard work, and you’ll likely see some erosion in your competitive advantage even if you can pull them off. For example, Monsanto has done a nice job protecting its RoundUp herbicide franchise with brand advertising and other mechanisms even though the patent on the chemical has expired (although the profit margins are probably lower now).
Subject matter
This is the least relevant factor because almost all subject matter is patentable. If your only concern is that your invention is not a true “technology,” then take the time to meet with a patent attorney.
There are examples of patents on things you might not think of as patentable. Have you ever heard of ‘online reverse auctions’? A small company patented this idea and asserted its rights successfully against eBay. What about ‘credit card incentive programs’? Yes, this idea has been patented too.
Perhaps you have seen ‘televised poker’? It has been patented in Europe and there is a patent pending in the United States by WPT Enterprises, producers of World Poker Tour on the Travel Channel.
Sounds crazy? Well, the “Crazy Taxi” video game was also patented. A good attorney can tell you if your idea is too far out to be patented.
Perhaps the best rule of thumb is to start by asking: “If I paid my employees lots of money to develop the technology, shouldn”t it be worthy of a patent and worth patenting?” Then look at all of the various issues above to determine how they apply to your particular business.
Lastly, make an appointment to speak with a patent attorney for an initial consultation. That doesn’t cost a lot of money, but you can get an honest assessment of whether you are likely to obtain a patent, and whether such a patent could be valuable to your business.
Only after fully assessing all of the key factors can you make an informed decision about developing a patent strategy as part of your broader business strategy.
