United States: Patent Strategies For Start-Up Companies

Last Updated: December 18 2015
Article by Rajesh Vallabh

Patents can be vitally important for protecting the innovations of a start-up company, just as it is important for start-ups to be mindful of trademark, copyright, and domain name strategies (see our other guides for start-ups, including Trademark, Copyright, and Domain Names). A patent is a government-granted right that prevents others from making, using, selling, or importing a patented invention. Having patents covering a start-up company's key products or services can prevent theft of intellectual property by larger companies, make the company more attractive to investors and potential acquirers, and increase company valuation. In addition, a strong patent portfolio can help a start-up company deter patent lawsuits from competitors and become a source of revenue through licensing.

What can be patented?

Virtually any type of product, system, or method is patentable. Things that cannot be patented include laws of nature, physical phenomena, and abstract ideas. Recently, the U.S. Supreme Court has ruled that certain types of business method and software patents covering basic economic practices are abstract ideas that are ineligible for patent protection. Start-up companies should give careful consideration to patent eligibility issues when deciding to file a patent application, which should be carefully drafted to avoid patent eligibility rejections and challenges.

In addition to meeting the patent eligibility requirements, an invention to be patented must be novel (i.e., different from what already exists in the public domain) and nonobvious to people skilled in the invention's field.

Don't Forget About Design Patents

There are two main types of patents: utility patents and design patents. Utility patents protect the functional aspects of an invention, while design patents protect the ornamental appearance of an invented object. Utility patents are far more widely used than design patents and will be more likely to be applicable to most technology start-up companies' innovations. However, robust patent portfolios often include both types of patents. For example, a smartphone may be covered by utility patents protecting the electronic components and software in the device, and design patents may be used to protect the appearance of the device, including the shape of the outer housing and icons and other graphical user interface elements displayed on the screen.

Does a patent give me the right to practice an invention?

While a patent provides its owner with the right to exclude others from practicing the patented invention, a common misconception is that it automatically also gives its owner the right to practice the patented invention. Even if you have a patent, there may be a prior patent that claims the underlying subject matter and prevents you practicing your invention.

What about trade secrets?

Instead of using patents, start-up companies may be able to protect their inventions through trade secrets. A trade secret is information that is kept secret by a company and that has some value as a secret. Coca Cola's syrup formula is an example of a trade secret. Patents, by contrast, make a public disclosure of an invention when published or issued.

Start-up companies will have to rely on trade secret protection instead of patents when an invention is not patentable (e.g., the invention is ineligible for patent protection or a patent application was not timely filed). Companies may also decide that trade secret protection is less expensive than the cost of filing a patent application. Also, patents may not be a desirable option when the product life of an invention is short, particularly given that it ordinarily takes 2-3 years to obtain an issued patent. On the other hand, trade secrets have little value when the product can be reverse engineered or when others can be expected to independently make the invention.

Patent Application Costs

The costs for obtaining a patent in the U.S. vary greatly, depending largely on the particular technology involved and the complexity of the invention.

As an alternative to filing a full utility patent application, start-up companies may consider a provisional patent application, which can be filed at a lower cost and without claims. Provisional patent applications are not examined by the Patent Office and must be replaced by a full utility application within one year. Provisional applications can usually be filed more quickly, and are particularly useful when a deadline is imminent. However, if the provisional application is subsequently replaced by a full application, the overall costs will likely be higher and the issuance of the resulting patent will be delayed.

File patent applications early

The U.S. has a "first inventor to file" patent system, meaning that if two inventors independently make the same invention, the one who files a patent application first will generally get the patent. Also, in the U.S., inventors must file their patent applications within one year of making a public disclosure of an invention. In most foreign countries there is no such grace period, so if a foreign patent is desired, an application should be filed before any public disclosure of the invention.

Should companies file patent applications outside U.S.?

Start-up companies should be strategic about filing foreign patent applications, which can be costly due to high foreign government fees, translation costs, and foreign lawyer charges. Companies should consider filing applications in countries where they currently sell or expect to sell the products to be patented, where those products are manufactured, and where potential business partners and competitors operate. Such filings will help prevent others from producing knockoffs and potentially provide the company with leverage in business dealings.

Identify Inventors Correctly And Obtain Patent Assignments

It is important to correctly identify the inventor or inventors on a patent. Failure to correctly identify each inventor can lead to invalidation of the patent. Also, each inventor of a patent presumptively owns an interest in the entire patent. It is therefore also critically important that employees, contractors, and others performing work for a start-up company be under an obligation to assign their patent rights to the company.

Each person who contributes to the conception of an invention should be identified as an inventor. When two or more people jointly contribute to the conception of the invention, each person can be a joint inventor even if he or she made a smaller contribution compared to other inventors, or contributed to only one feature of the claimed invention. A person is probably not a joint inventor if he or she only acts under the direction and control of another, e.g., in performing tests or building prototypes.

Parting Thoughts

Patents can be critically important to the success of a start-up company. Companies should utilize patents as an effective part of an overall intellectual property strategy to protect their innovations.

To view Foley Hoag's Trademark and Copyright Law Blog please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
25 Oct 2017, Webinar, Boston, United States

Foley Hoag will present a 60-minute webinar on Wednesday, October 25 at 12:30 pm EDT, offering guidance for in-house counsel regarding the basics of trademark and design protection in the European Union. Attendees will learn about the opportunities and pitfalls to be on the lookout for when looking to secure, protect, and enforce an IP portfolio overseas.

1 Nov 2017, Webinar, Boston, United States

Please join Foley Hoag on Wednesday, November 1, 2017 for a webinar that covers the details of drafting an appropriate arbitration clause for your company’s commercial contracts.

9 Nov 2017, Conference, Waltham, United States

Please join us on Thursday, November 9 at the Westin Waltham Hotel for our quarterly New England M&A Forum, which brings the latest in market trends and recent legal developments to the New England M&A professionals' community.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.