To be successful you need to establish a competitive advantage. You need to have some “secret sauce” that your competitors don’t. For this reason, many start-ups invest time and money — often a lot of time and money– in filing patents for aspects of their service that they believe are unique. This is often encouraged by early investors or prospective investors who see a patent as a tangible asset. In fact, I put in long hours helping to draft and file patents for three different companies. From what I can tell, all three were a waste of time. Here’s why:
1) A patent really isn’t a patent until it’s challenged. Think about how the patent process works. You write up what you claim is a unique approach. You pay lawyers money to perform a cursory review to find similar inventions. You do your best to make sure there’s some distinctive aspect to your invention. If you feel like you’ve got something unique, you write up your patent with enough broad language to allow for wiggle room for later, but not so broad that it will overlap with existing patents. Your application is reviewed by the USPTO and approved if there isn’t an obvious overlap with an existing patent. The word “obvious” here is important because when you think about the flow of filings and the available staff at the patent office, there’s no way they can be sure that your patent will stand up against existing patents. You really won’t know until you try to enforce your patent in court.
2) Drafting a patent is a diversion. In a start-up this time is especially precious. The time you spend writing up a patent and working with lawyers could be better spent working with prospective customers, refining sales materials, and building the product. Anything you do besides building and selling is a diversion from the most essential question: do you have a business that’s solving a market need?
3) Competitive advantage comes from constant innovation rather than one feature. Unlike a mechanical product like Velcro or Zipper there is much more to your business than one feature. And in the area of interactive services — web, mobile, and media — most ideas aren’t unique. Perhaps you have a new algorithm for compressing video. Perhaps you have a better way to match advertising with online behavior. Perhaps.
I’m sure some will read this and point out that there are companies that have become valuable simply because of their intellectual property. This is true. It’s important to emphasize again, however, that you need to have enough money in the bank to fund enforcement of your patent to prove that it’s really a patent. If you can make it past this hurdle, you have a real asset. A patent that hasn’t been challenged is a potential asset not a real asset.
What should you do? Simple. Focus on getting customers. If you feel like you have something really unique, file a provisional patent to buy yourself a year. A provisional patent is relatively quick and inexpensive (on the order of $1500 with legal help). If you’re getting traction in the market and you believe that feature is what distinguishes your offering, then follow through with the filing of the utility patent within a year.
I’m not alone in this opinion. Even Eric J Heels, an IP lawyer, says patents are a waste of time.
Some related thoughts:
A patent can be used as a bargaining chip. If your company is sued for infringement, it’s possible that being able to threaten a counter claim would help your position. This gets into the rat hole of how ridiculous and costly patent trolls and erroneous patent infringement threats have become. Brad Feld has a good post on this subject lamenting the madness of the current patent system and the effect of trolls on start-ups. I met with an executive who spent $1M of their $5M initial round of funding trying to defend an erroneous patent. They should have just settled and paid the royalty to find out if they had a viable business (it turns out that they didn’t). You may think with this addendum that I’m contradicting myself — clearly patents are valuable for some companies if they’re can be used as a club to extract royalties. I you want to play this game (and I hope you don’t) you’ll need the resources to threaten to prosecute and then follow through with the defense if it gets to that point. Once you have a win on your side (in other words a real patent), then you’re golden. If you think you can make it through this gauntlet, then go for it.
Like most business decisions, there pro and con arguments. You need to decide where your company is and what the opportunity cost is for diverting time and attention from building and selling.