Imagine that as a start-up you have an innovative idea that will do away with the hassle of face masks and plexiglass. E.g., an advanced piece of protective equipment to guard against the coronavirus. You make a preliminary prototype and show it to a few people whom you trust. They are enthusiastic. You then need to develop your idea further into a marketable product. Except that generally, few people are able to that on their own. For starters, there’s a piece of electronics in there that you can’t miniaturize yourself, you need to have some software written. Plus, you have to look for materials with the necessary specifications. You also have to find funding for developing it further. And that’s when it gets all a bit nerve-racking.
This quest for the right suppliers and financiers entails a lot of risks. If you present your prototype, the other person can start making the same product without you even being involved. You could sign a Non-Disclosure Agreement (NDA) or not reveal anything about the final product. But you are extremely vulnerable, So, if someone does steal your idea, there’s very little you can do about it. You will have to prove that the other person has violated the NDA. That vulnerability is also a problem for those who would like to invest in your idea.
Copying is cheaper
What’s more: imagine that you manage to take it to the next stage of development and get the first series of your product onto the market. Moreover, suppose your product turns out to be a great success. Even then, it’s often very easy for other people to copy your product and put it onto the market at a lower price. After all, they have hardly incurred any development costs. If you want to do something about that, a patent application is well worth considering.
Can you defend your patent?
Patent critics frequently say that, as a start-up, you simply cannot defend a patent anyway. Certainly not with the limited financial resources you have as a start-up. It’s true that large companies have deeper pockets. And lawsuits take up a lot of time, which you’d rather spend on your innovation. But that’s a relatively frightening legal view of the patent system. You should also make a distinction between patents and patent applications.
What a patent application can do for start-ups
After filing a patent application, you will then be able to talk about your idea, look for financiers, work with others more securely, and expand activities, or even start selling. Apart from that, it’s good for the image and value of your start-up. The first two and a half years are reasonably affordable. It is only after those first two and a half years that a patent application will cost a lot of money if you want to have it approved in several countries. Here are a few more advantages to patent applications:
- They’re attractive for financiers. Investors attach great value to a patent application when it involves an interesting technology. Why is that? The patent application can sometimes serve as a basis on which multiple applications or companies can be built. And if the original inventor’s company were to collapse, the patent application can be sold off.
- They ease cooperation. With a patent application in your pocket, you don’t have to constantly be secretive about everything. It is then clear from the outset what belongs to whom. And it is no longer possible for any cooperation partners to claim that they are the inventor of what is in the patent application. They are therefore less likely to walk off with your idea. Large companies even prefer to work with start-ups that have patents pending. As it is then clear what belongs to whom. And if someone else does run off with your idea, it is also easier to find supporters to defend it. Even if the application has not yet been granted. There are plenty of examples of this.
- They add to the company’s value. A company with patent applications is often worth more than the same company would be without patent applications. How much? The value of a patent application depends on each business case, the entrepreneur’s capabilities, and the content or strength of the patent application. Besides, nobody really knows if a product idea will succeed in the market. An absolute financial worth is therefore never stated before many other matters are clear. Generally, the patent application has strategic business value in a variety of areas. Especially when considering an exit, investing in patent applications is crucial!
- Good for the image. The term ‘patent pending’ lends an innovative image to a company or business case. It also turns out that salaries at companies that have patent applications or other intellectual property rights are higher than at other companies and are more attractive to work there.
- Back-up in the event of infringement. If, as a start-up, you are found to have infringed on the rights of others, an interesting patent application can be used as a kind of concession. The other party may be interested in licensing your patent application. Expensive lawsuits can be avoided by exchanging these. This is another way in which a patent application forms a strategic value.
Have a look at how a patent application can add value to your business and do not be deterred by wild-west stories that you can’t hold on to your patent as a start-up.
Hans Helsloot is a patent advisor at the Netherlands Patent Office but has written this column in a personal capacity.
About this column
In a weekly column, alternately written by Hans Helsloot, Eveline van Zeeland, Jan Wouters, Katleen Gabriels, Mary Fiers, Peter de Kock, Tessie Hartjes and Auke Hoekstra, Innovation Origins tries to find out what the future will look like. These columnists, occasionally supplemented with guest bloggers, are all working in their own way on solutions for the problems of our time. So tomorrow will be good. Here are all the previous IO articles in this series.