Investing in Intangibles.
The perennial start-up story: get the most out of the few scarce resources available.
To succeed, the savvy entrepreneur deploys her limited assets to: assemble the right team; complete a representative MVP; attract investors; negotiate with distributors; promote the business… and more.
With so much focus on resource efficiency, the value of patents is often overlooked.
True: a patent may not provide returns on Day 1. There are risks to filing. But in many situations– and increasingly with the market shift toward services – the patent may represent most of a company’s value.
A patent provides a 20-year monopoly on the claimed invention, which allows a start-up time to recoup investment costs in the invention.
For an invention to be patentable, it must be new, useful, and non-obvious to a person skilled in the art – meaning someone knowledgeable about the invention’s subject matter or the industry of the invention.
Is a Patent a Good Investment?
Whether a patent is a good investment for your start-up depends on the nature of your product, your go-to-market strategy, and your budget, among other variables.
Where your product’s comparative advantage is some patentable invention, or where it is on the cutting-edge of technology, patent protection could be valuable. On the other hand, where your start-up works exclusively in software or coded products, patent protection may be harder to acquire and less valuable. When considering whether a patent will add value to your start-up, it is important to begin with what the invention is, whether its protection will materially improve your position in the market, and what the value of its protection is to you.
Patent strategy can also be informed by your go-to-market strategy. Where you goal is to be first to market and reap the benefits of a first-mover advantage, patent protection may not always be in your best interest – you will need to spend time distilling the invention into its patentable claims. However, a patent could provide you a sustained market advantage through the monopoly on the invention if it also acts as a barrier to entry for competitors. In more technical and mature industries, patents can help you carve out market space.
Of course, your ultimate decision on patents must also be informed by your budget. Patents are not inexpensive. The process of getting a patent granted by the patent office can quickly costs thousands of dollars and asserting it will typically involve legal counsel and can result in expensive litigation. Nonetheless, these expenses may be offset by the value a patent adds to your start-up. As an asset of your business, a patent can help in valuations with investors and can provide above-market profits where your patent covers an invention important to your industry.
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© 2020, Gilbert’s LLP. All rights reserved. This post is provided for general information purposes only and does not constitute legal advice or opinion of any kind. Gilbert’s LLP does not warrant or guarantee the quality, accuracy, or completeness of any information in this post. This post is current as of its date of publication. It should not be relied upon as accurate, timely, or fit for any particular purpose.