Intellectual Property an Asset, Not a Crutch For Startups

By Valerie Rozycki Wagoner, Founder & CEO, ZipDialLately when I have had the pleasure of presenting to audiences of aspiring entrepreneurs I have noticed a lack of clarity and varying views around intellectual property. Entrepreneurs are often unsure of whether or not to patent their innovations and how to go about it.

I am not an expert on intellectual property law, but having personally managed the patent portfolios and filed 19 patents for my last two startups, mChek as well as the company I’ve founded, ZipDial, I have insights to share from the entrepreneur’s perspective.

First, I want to Hear from You!

To validate (or invalidate) my observations, I’d like to collect some views from you the audience. Before reading further, please take a second to pull out your mobile phone and ZipDial (toll-free missed call) to respond to this quick poll: 080 493 11 839

We will end this poll on January 15^th, and the results will appear in my next column.

Setting the Stage

Below is a quick overview of the patent filing process. This will help give context to some of the lessons I’ve learned:

1.      File a provisional patent in one country covering your innovation broadly, though not necessarily every detail or permutation.

2.      Within 12 months, file a complete specification covering all claims in order to protect and differentiate your innovation. File in the original country and consider filing internationally. A Patent CooperationTreaty (PCT) Application gives you the option to file within any member countries of which there are over 140 (link).

3.      Within the next 12 months from the PCT filing date, select the countries from the PCT countries in which you’d like to file your patent and complete those applications.

4.      Over the next couple years while your patent applications are being processed, you will have to respond to inquiries from the various intellectual property authorities where you filed. Timelines vary by country.

5.      Patent granted! That is, assuming all has gone well.

Lesson 1: Move fast, then take your time

Protecting your intellectual property is expensive, but by properly timing the steps to move you through the filing process, you can optimize cash flow.

Four tips:

• Your provisional patent filing date is the date that establishes your innovation as prior art, so move fast.
• A prior arts search is a very important exercise to determine how novel and unique your innovation is and even if it is worth protecting. However, this is a costly process and one that can be done after filing the provisional patent and before moving forward with the complete specification.
• Wait as long as possible to move through each step in the process. For example, you can wait 10 months from the provisional date to file the complete specification. The important provisional date will not change, and you can use the time to build up your revenues and better manage the significant filing costs.
• Don’t miss your filing deadlines!

Lesson 2: Be aware of less obvious costs

Ask the right questions to understand all of the smaller and less obvious costs included in filing.

Three tips:

• Administrative costs of printing, courier, etc. will be part of your final legal fees, and these small things can add up. Ask about them in advance to not be surprised by them later.
• International filings are typically handled by foreign counsel who are experts in the local laws and work in partnership with your IP attorney at home. Be aware of additional fees, and don’t hesitate to ask about the billing relationship between your firm and those in other market.
• Translation fees (and hefty ones at that) may apply in various markets where the official language is not English. Be aware of this when selecting jurisdictions for international filings. I’ve personally had surprises with large bills from these unanticipated costs!

Lesson 3: Consider Australia!

As mentioned above, your priority date is based on the provisional patent filing date. Therefore, even if three or more years pass before you patent is granted, your priority date holds. However, there may be strategic reasons why you would want to speed up the patent application process such as fending off potential competitors or showcasing IP assets to potential investors.

One such opportunity to do so is the Innovation Patent offered in the jurisdiction of Australia that is an alternative to the Standard Patent. Innovation patents provide protection for up to eight years, may only comprise a maximum of five claims and have a reduced threshold for inventiveness. In this respect, an innovation patent claim must comprise an “innovative step” which is a substantially lower threshold as compared with an “inventive step”. Despite these limitations, I can attest from personal experience that if the application is strong, it is possible to have a patent granted within a year, and this shortened timeline itself may have strategic value.

Your IP attorney should advise you on what other options are available, but at very least, this tip may be a consideration for your IP strategy.

Lesson 4: You will still have copycats

Never assume that IP protection is the sole answer to your competitive barriers to entry. It takes years for patents to be granted, and if you are not executing well, by then your competitors may have beaten you out of the market. In a more positive scenario where your patents are granted and you hold a meaningful position in the market yet a competitor has copied your innovation, you still may not decide to exercise your rights. Litigation is a very expensive process with uncertain outcomes, so think twice before taking action, especially if your opponent has deeper pockets than you.

Lesson 4 is the most important. I believe in understanding intellectual property and using it as a valuable long-term asset for your company. Remember, I’m on my 20^th patent filing across two companies right now! But legal protection will not make you the market leader. For startups, nothing can replace entrepreneurial passion, a strong understanding of the market, and relentless focus on excellence in execution.