Invest in and grow your intellectual property (IP). Those were the key take-home messages from an SDEE workshop titled “Intellectual Property for Entrepreneurs – From Principles to Practice” sponsored by American Laboratory Trading (ALT) and Hera Hub. IP is essential for protecting technology and many entrepreneurs struggle to integrate IP into growth strategies. To gain insights, SDEE hosted a workshop with speakers experienced in patent law and strategies: Ray Wagenknecht, Managing Attorney, Wagenknecht IP Law Group, PC; Noel Gillespie, Partner, Procopio, Cory, Hargreaves & Savitch LLP; and Joe Mullis, General Manager, Neology Corporation. Here is a summary of what was presented at the workshop.
Introduction to IP
IP is an intangible asset similar to trademarks, business methodologies, and goodwill. Types of US patents include utility, design, and plants (horticulture). In general, “anything under the sun made by man” can be patented, but must be novel, useful, and non-obvious. Laws of nature, physical phenomena, and abstract ideas are excluded. This was the conclusion in the decision of Diamond v Chakrabarty, the first patent for a genetically modified bacterium capable of breaking down crude oil components. Mr. Wagenknecht explained that patent rights are really negative rights, meaning that a patent doesn’t provide the owner the right to practice the invention, but rather grants the owner right to exclude others from making, using, selling, or offering to sell the invention. Moreover, practicing the patent may be impeded if doing so would violate the claims of another patent.
Patent Logistics – Where, When, Who
Things to consider when filing for a patent include where, when, and who. IP rights granted in the US provide protection only in the US. Centralized filing under the Patent Cooperation Treaty (PCT) can provide international patent protection for 188 member countries. Mr. Wagenknecht recommends generally filing as soon as possible. One approach is to use the provisional application, which establishes an early filing date, but does not mature into an issued patent unless the applicant files a regular non-provisional patent application within one year. It’s best to file before signing with a manufacturing partner and when preparing a manuscript for publication. If the application is not filed before publication, foreign rights may be lost. With regards to inventorship, authorship, and ownership, assess who was really instrumental to the claim of the patent. An author of a publication is not necessarily the inventor. The inventor is often times the owner. However, if invented while employed at a company or university, the employee may have an obligation to assign ownership to the employer.
Create Value Through IP
Mr. Gillespie opened his session noting that at each stage of funding and company growth, your audience will differ on how they value your IP. He says to “walk up the ladder” of your funding strategy so you have the right progress or protection for your investors, balanced by the right costs to you. Create a strategic plan that shows how your filings will progress to meet the requirements of your funders. Something that conveys “if you invest in me, you’re going to own something.” At each stage from seed, angel, to series A and onward, funders will increasingly want to see progress with IP planning, filings, and competitive blocking strategies. A patent attorney can help you develop a competitive strategy that aligns with your business plan and anticipates market and competitive movements.
Creating Additional Revenue
Patents you file related to your technology may be relevant in other verticals, industries, or markets. Mr. Gillespie says that identifying this opportunity early helps ensure that the disclosure adequately covers the alternative use. But you need to plan as though you will eventually monetize the alternative uses. This a good strategy to fall back on should your product lines mature and become commoditized or you need to create additional revenue from patents that don’t cover your current products. Options include licensing, selling, spin out, or enforcing. Another strategy to consider is acquiring additional patents that can be combined with yours in order to increase the value. It’s a continual process to invest in and grow your IP so it creates value for the company.
Enforcing Your Patents
Startups typically don’t think they can afford to enforce their patents. But for a company like Neology, they couldn’t afford not to. Joe Mullis shared the story of how the RFID industry ended up coalescing around his company’s technology and became the standard. At that time, however, his company was at a point where it was impossible to raise money or be acquired. Their current investor was not investing more money and there wasn’t enough cash coming in. Even though they had the IP that anyone doing the standard would be infringing on, no one wanted to pay for it. They would rather steal it or work around it. It was a hard sell for the company, but Neology made the move to enforce their IP. From there the company was able to attract partners and monetize its investment. Mr. Gillespie underscored that once you enforce your IP and are willing to put the weight of your money, effort, and time behind it, the market will realize you are serious. If you’re not willing to do it, no one will pay for it. Mr. Mullis concurred that IP plays a role in how you raise money and how you grow your company. Enforcing your patents demonstrates not only your commitment to the technology but can also increase the value.