Aylin is an attorney and a mentor at Startupbootcamp Istanbul, specialising on intellectual property law for startups at UC Berkeley, where she obtained her PhD. She also provides technology consultancy at her firm Igniters Tech Consulting. In this post, she briefly explains whether a young startup needs patent protection and the easiest ways to obtain it.
There are four kinds of intellectual property (“IP”) protection for your tech products; patents, trade secrets, trademarks and if we are talking about software, copyright. Applications for patent and trademark protection are made to United States Patent and Trademark Office (“USPTO”). Application for copyright registration of source code and object code is made to United States Copyright Office (“USCO”). As there is no formal registration process for trade secrets, each company employs different strategies for trade secret protection. As USPTO is being swamped by hundreds of thousands of applications each year, it takes approximately 4 years to get a utility patent. For trademarks the time period for approval is 6 months to 1 year and for copyright it is 8 months for online applications and 13 months for applications by mail.
Benefits of getting IP protection
This varies depending on the type of intellectual property. A patent holder has the right to exclude others from using, making, importing and selling his invention. If you register your copyright in software within five years of publication you are regarded as the owner of software and may exclude others from reproducing, displaying, distributing copies of your copyrighted software. Patents and other IP rights, however, are enforced territorially which means making of a patented software in another country will not be considered an infringement unless the said software is imported to US.
That being said, the ability to exclude others to enter the market grants the patentee an opportunity to reduce competition and set higher profit margins. Another big advantage of holding patent and other IP rights for startups is that it may serve as an investor magnet as it reduces the risk of litigation due to a potential infringement. On the other hand, if your startup’s business strategy is being acquired by a big tech company, your IP portfolio will matter in determination of the acquisition price. Patent portfolio of a tech company is regarded as a top metric in its innovation value as it is a sign that the company has an innovative engineering team. Furthermore, tech companies may generate revenue through licensing their patents.
IP protection is beneficial in defending your company against patent and copyright trolls. Trolls are non-practicing entities that hold a patent or copyright pool and sue companies for infringement just to extract money. When a startup is sued by a troll, it might end up shutting its business down as it often does not have enough resources to allocate for huge amounts of litigation expenses. Also in many cases you may only file a copyright infringement lawsuit if you have registered your software at USCO.
How much would it cost a startup to apply for a patent?
Startups, which qualify as a small or micro entity, may pay discounted fees for utility patent application at USPTO. For instance application fee for micro entities is 70 USD (25% of the full price) whereas it is 140 USD for small entities. If you apply by yourself without support of an attorney or patent agent, the average cost will be around 1000-1800 USD for a small entity and 400-800 USD for a micro entity. Application for a software patent has become even more complicated after the US Supreme Court’s Alice vs. CLS Bank decision so I would advise consulting an attorney if you have a complex software invention. Then, the total cost of a patent application for software or a computer-implemented invention would be around 10000-15000 USD. Compared to patents, the cost of getting a copyright or a trademark registration is pretty low. The attorney fees plus governmental fees for copyright registration costs around 250-500 USD whereas for trademark it costs 1000-2000 USD.
I would advise startups that do not have enough resources to consider provisional patent application which costs only 65 USD (application fee only) if you apply by yourself and around 1000-1200 USD with the help of an attorney. A provisional application provides the means to establish an early effective filing date in a later filed (12 months) non-provisional patent application. Also as it allows the term patent pending, it provides protection when you present your invention to investors and licensees.
Should you apply for a patent?
It is really crucial for a startup to identify its business goals and key technology as the application cost is high and it takes around 4 years to get a patent. While deciding to apply for a patent, you should ask at least these questions:
What is your company’s key technology?
Is obtaining a patent really material to your startup’s success?
How durable is your technology in a fast moving sector?
Is licensing in case you infringe on someone else’s patent viable?
What is your exit strategy?
Should you develop a patent portfolio specifically for cross-licensing in case you infringe?
And so on. Some inventions are incredibly valuable and are worth patenting. Some inventions might be patentable but not worth your money and your time. You might also consider copyright, trademark and trade secret protection as the costs are considerably low compared to patent application.