Intellectual property (IP) fundamentals for startups: Patents and patent protection

Once you’ve developed your noteworthy application, algorithm, formula or device, you may need to stake an intellectual property claim to your idea. Read on for a primer on patents and what founders should know about when, where and how to seek protection for their technologies.

What is a patent?

A patent is a limited monopoly provided by a government in return for the disclosure of an invention. A patent is limited in the sense that it provides a defined set of rights for a specific period of time. (A patent will typically last for twenty years from the date of filing.)

When should a startup seek patent protection?

The decision to patent a particular invention depends on a number of legal, economic, business and technical factors.
From a legal perspective, you will need to consider whether it is better to protect a product under a patent or as a trade secret. This decision involves a number of trade-offs.

  1. If you choose to protect an innovation as a trade secret then your protection lasts potentially forever. Two examples of long-standing trade secrets are the Coca-Cola® formula and the KFC® recipe.
  2. If you obtain a patent you must disclose your invention and you will not be able to prevent others from using it once your patent expires. If you choose to protect your invention as a trade secret, the law will only protect your innovation against unlawful discovery.
  3. If your innovation can be easily ascertained through inspection or reverse-engineering, then trade secret law will not provide sufficient protection.

What legal protections do patents provide?

Patents provide you with many legal protections. One you’ve received a patent, you can prevent other people from making, using, selling, offering for sale or importing your invention for twenty years. However, this protection only applies in the jurisdiction in which the corresponding patent was issued.
Most startups that seek patent protection consider some form of international strategy in order to cast as wide a net as possible to protect any related business opportunities.

What other economic factors should founders consider?

From an economic perspective, patent protection can be expensive to obtain and more so to enforce. Additionally, the application process can often take many years.
You need to determine whether you can justify the costs of patenting a particular innovation and whether that innovation is likely to still be important to your company at the time when the patent is issued.
Balance this assessment against other potential short-term benefits of filing a patent, including an improved ability to demonstrate to customers, partners and investors that you hold a sustainable competitive advantage.

Do we need patents in order to raise external investment?

While filing for patent protection over a core technology often comprises an important criterion for potential investors, it is not an absolute prerequisite, especially with software or web-based businesses.
Founders should certainly not feel the immediate need to secure a provisional patent before making the rounds with investors. Of greater importance is your attention to detail in developing a comprehensive intellectual property (IP) strategy that addresses and fits your business risks and objectives.
Your IP strategy may or may not include patent protection, and it may only include patent protection if and when your start-up acquires the necessary resources.
This article was produced by James Smith and Shane MacLean and is made available through the generosity of Labarge Weinstein Professional Corporation.