Entrepreneurs often ask “What is an IP
strategy.” It can seem somewhat a nebulous concept if one is not familiar with
IP and its importance whether you are a startup or an established company. For
the most part, an IP strategy consists of policies and procedures that are
consistent with the goals and needs of the company. It should help
entrepreneurs and CEOs prioritize their efforts develop a portfolio of IP
(e.g., fortress IP) while optimizing/minimizing expenses for both R&D
and patent support (e.g., attorneys and filings).
KEY
ELEMENTS OF AN IP STRATEGY
The key elements of an IP strategy are, in
approximate order of importance:
Align the IP portfolio with the
company’s mission and goals. Alignment of the IP portfolio with the
company’s mission and goals provides the best use of
human resources (especially the technical human resources that are focused on
innovation, invention, and IP) and financial resources. The goal is to achieve
the highest possible return on investment,
protect the essential value of the company, create and maintain competitive
advantage through innovative products, protect future revenue and profit opportunities,
and secure investors based on the quality of the IP portfolio. The “quality” of
the IP portfolio is based on considerations such as technology and its
uniqueness, evident innovation, number of patent applications considered foundational, ability
of IP to protect target markets, perceived competitive advantages, etc.
Focus R&D effort on validating proof
of patentability. Eventually, filed patents are reviewed by the USPTO, and
their due diligence will focus on the proof of patentability.
Thus, early efforts, no matter how affected by potential deficiencies in
company funding, must be used to develop the robust underpinnings of the patent
applications. Any effort not central to that goal should be
minimized.
Select an appropriate patent attorney.
A patent attorney should be chosen on the basis of experience in the areas
germane to the field of the company, his/her familiarity with working for
start-ups, expectations for payment of fees (for instance, will he/she tolerate
waiting for your company to be funded before being paid), experience with both
prosecution (e.g., patent development and filing) and litigation, and your own
intuition about developing a good working relationship with the patent
attorney.
Continuous surveillance of the external
landscape. Regular searches of granted patents is essential to keep on top
of developments, but it should be kept in mind that those granted patents will
be based on technology and ideas developed several years earlier. So, while
relevant, these granted patents only define the rough areas where you may or
may not operate. Patent attorneys are useful in surveying and understanding the
patent landscape and will often refer to the concept of “freedom to operate,”
or FTO, as a fundamental principle behind the more general notion of external
landscape. The external landscape also includes reviews of competitor products,
marketing materials, and web postings, as well as incidental conversations with
competitors at conferences and similar venues, etc. Understanding prior art and
the data from FTO searches are vital pieces of knowledge for tailoring
innovations, inventions, and IP (especially claims) so that they can eventually
compete in the public marketplace. Envisioned products to be sold must be
supported by underlying markets that are large and growing or offer high
potential gross margins. Understanding the external landscape is an intrinsic
part of the marketing-and-sales plan.
Consider the number of formal patents.
Given the cost factors and importance of the invention itself, a few good high-quality
patent applications are much preferred over a plethora of lesser applications.
It is tempting to file many applications with the thought that the sheer number
of patent filings will make the company more valuable. Such value creation may
not accrue, however; investors will spend considerable time attempting to
understand the potential of an invention in terms of future revenue and profit
and may not agree with founders. Patent applications that lack in innovation, quality
of invention, or usefulness in terms of potential future products and markets
will erode investor opinions of the value of the investment opportunity. Simply
put, fewer high-quality applications are generally better than higher numbers
of lesser quality.
Make a long-term budget and be
realistic. Entrepreneurs and their patent attorneys should carefully select
countries to file in to make optimum use of cash relative to their
market/profit potential. File only NPAs that are essential. Carefully differentiate
ideas and innovations that should be patented (to create value, protect
products and markets, etc.) from those that can be more economically preserved
as trade secrets. Creating IP can be expensive. The cost for filing patents and
prosecuting them (including maintenance expenses) must be included in the
financial plan. When, as is often the case,
patents are filed in multiple countries (e.g., major markets), the cost
increases proportionately. PPAs are relatively inexpensive and can be filed in
as many numbers as deemed necessary to capture the incremental improvements of
the invention and their proof of patentability.
Consider the “promotional” value of the
patent filings. Patents may take years to develop, and in the years between
the filing of a PPA and the receiving of the granted patent, the written
information available for the inventor/entrepreneur for use with potential
investors is limited to the filing papers for the patent application. Thus,
aside from the obvious value of generating good and robust patents, their
usefulness begins the day the PPA/NPAs are filed. Promoting the value of the
patent applications based on the quality of the written word (in addition to
the invention, of course) can be achieved though good writing, solid arguments,
and profuse and relevant data.
Preserve IP as trade secrets. Some
thinking should go into the issue of what IP should be kept as patents and what
should be kept as trade secrets. For instance, aspects of the invention that
may be easily seen in a product (visual) may be patented, as detection of
infringement is relatively easy. On the other hand, process-oriented IP (e.g.,
how something is manufactured or made by chemical composition, etc.) may be
better preserved as a trade secret, as discovery of infringement may be too
problematic and expensive. If something can be reverse engineered (most
everything can be) or made in several different ways, then a process patent may
have less use; however, if there is only one best or unique way and you intend
(or have money) for major markets, then it may be worth patenting versus
keeping as trade secret. These can be difficult issues, and their resolution
should be accomplished in consultation with the company’s patent attorney.
Deciding whether to patent something or
preserve it as a trade secret is often an important issue with respect to
developing an IP portfolio. On the one hand, patents are well understood and
often formally valued, but trade secrets, while appreciated, can be somewhat
amorphous and hard to validate in terms of value.
OTHER
IMPORTANT ACTIONS
Other important aspects to consider in the
IP strategy are:
Keep IP ownership clean and unambiguous.
Many potential start-ups have been stopped in their tracks when their founders
discovered that ownership of IP was confused by one or more factors, such as:
Lack of proof of IP assignment to the company.
This often occurs either through negligence or absence of timeliness on the
part of a founder/inventor who is hesitant to share IP presently in her/his
name with the company in the form of an assignment document.
Founders who have come from, or are still
working at, another company whose technological focus is very similar to that
of the new start-up contemplated for formal incorporation. In this situation,
the ownership of the envisioned IP (usually in the form of ideas not documented
yet) is suspect because of the prior or current employment. These situations
are extremely problematic for future investors because of many potential
unknown factors. These factors must be sorted out with a patent attorney before
forward motion can be achieved. It is often better to simply not invent or file
a PPA until the terms of the prior employer’s employment (or separation)
agreement is satisfied and a period of time has passed since resignation.
Employment agreements that secure IP developed
during employment have not been executed, and discoveries, innovations, and
inventions have occurred before a legal relationship is secured via the
employment agreement.
A founder’s use of a prior or current employer’s
resources or development on company time without disclosure or agreement to
distinguish the ownership of the IP.
File “omnibus” patent applications as a
way to economically preserve multiple inventions. An omnibus patent
application is one for which multiple separate inventions are expected to be
the result of the USPTO’s initial application review. While some may argue that
separate applications should be made from the onset, the advantage of the
omnibus application is that it establishes a filing date for all the potential
inventions at the price of an individual application. The USPTO will have an
initial office action that specifies that one or more invention applications be
subsequently filed. At that later time, the entrepreneur may elect, with patent
counsel concurrence, to file the individual patent applications believed most
appropriate. While some time is lost with respect to filing the other
applications, by that time, the entrepreneur may have raised more funds for the
purpose of building the IP portfolio.
Consider acquiring IP from external
sources. Securing additional IP that can support the company’s goals is a
potentially valuable strategy. IP can be secured from universities, other
companies, and governmental sources (NASA, DOD, etc.). While securing the
agreement can be challenging for a young company with limited or no resources,
potential license agreements can be momentarily secured via agreements that
call for only a token up-front payment in return for time (six months or a
year) needed to raise additional money.
Train employees to be sensitive to the
importance of IP. While the formality of a patent application often serves
to secure IP for the company, other forms of IP, such as trade secrets, have no
legal protection (outside employment, nondisclosure, and noncompete agreements)
and can be easily divulged, often by accident. Employees need to be instructed
on the forms of IP, their importance to the company, and the mechanisms and
procedures used to secure and protect that IP. This training needs to occur for
all new employees, and all employees need to be reminded on a regular basis of
their legal obligations and the company’s policies.
Preserve IP with contractors with
agreements. Agreements with contractors and consultants must contain clear
language as to the ownership of that IP in all its forms. If the company pays
for consulting or research, it is generally recognized that the paying party
owns 100 percent of the IP; however, legal agreements must make this clear. For
example, copyright ownership with a nonemployee requires that the work be
characterized as a “work for hire.” Consultants need to be reminded and
sensitized to their obligation to not discuss company research or activities.
Protect IP when discussing technology
with strategic partners or potential customers. IP can be created when
discussions with partners’ employees occur in unscripted situations and without
agreements that define who owns the ideas and derivative IP. This situation can
occur with strategic partners and potential customers when advance sales are
contemplated. Salespeople are prone to discuss technology, innovations,
etc., whenever they suspect a potential sale can result. Salespeople must be
advised to simply collect information on problems experienced by the customer
and the products/solutions desired. Those problems/issues can be brought back
to the technical team for solution determination and possible patent filings.
Once a PPA is filed that addresses the solution, the sales team, under a
confidentiality agreement, can return to the customer and present/disclose a potential solution. The
customer then knows that the underlying invention is owned by the early-stage
company.
Be sure to maintain patents by paying
fees when required. The company’s patent attorney will maintain schedules
of filings, office actions, USPTO filing fees, etc., so generally a CEO/CTO
will not need to do the tracking.
An IP strategy does not
need to be documented in a long, formal document; however, it should be
documented in several pages and then made in the form of a corporate policy for
each employee to read and understand. The IP strategy can be promulgated to
employees with e-mails (all or in part), along with regular reminders and
meetings with senior managers.
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