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August 10, 2022
EDITORIALOP-EDOPINIONPOINTS OF VIEW

Patents: the power engine of startups?

By Paul Cosmovici

 

The strongest symbol or the very “crown jewel” of a company is the intellectual property (IP) assets portfolio, with IP law being essential to promoting and protecting innovation, and innovation being key to the business environment and the economy development. Over the past years, IP protection, be it through trademarks, patents, copyrights, design rights or trade secrets has blossomed into a key standard practice to many businesses and has become a catalyst for the economy in many countries. And yet, from all forms of IP protection, patents arguably remained the power engine of innovation and have boosted economy, despite the pandemic, the stock market fluctuations, and the overall business market trends.

The popularity of patents is due to their potential to stimulate economic and technological development, foster R&D and even go as far as to create new business sectors. With technology still being disruptive to many companies that operate on more traditional business models, the challenges are met by ensuring a competitive advantage and the ace up everyone`s sleeve, is a solid IP portfolio.

 

Do startups need patents?

 

Yes! If you are a tech entrepreneur, you came up with a brilliant fresh new idea of a product and you want to ensure that no one is going to profit from your hard work and that you will have a valid bargaining chip when looking for investors or even for an exit strategy, you no longer need to ponder much about whether you should patent or not your invention. Even though many startups are less concerned with IP and allocate a great amount of their budget to other business needs, it is a trend on the rise for entrepreneurs to start engaging their investments into building up a strong IP portfolio.

From a strategical standpoint, if a tech startup patents an invention, the owner of that patent is not given statutory right to use that invention, but rather the right to prevent others from commercially exploiting it, thus the right ensures that others will be excluded from producing and selling that particular invention without giving the owner the rightful compensation for the intellectual work underwent.

What IP protection and, in extenso, patenting, do, is to stimulate creativity through the very conditions of patentability, as the invention must be industrially applicable, it must have the element of novelty, it must involve an “inventive step” implying that it could not be easily or obviously deduced by someone with ordinary skills in that particular technical field and, of course, it must be “patentable” as per the legal framework.

What should entrepreneurs be aware is that the patent is usually issued in the name of the individual (the inventor) and not to the startup, however, it has become common practice already that employees assign their patent rights to the company/employer.

 

Patenting: a solid marketing strategy?

 

Patents have already started transitioning from offering legal protection, to playing a complex role in terms of marketing strategy, which can have multifold implications for your business, regardless of the size of the company, so this goes without saying that it applies to both large companies and startups.

Imagine this: you are a tech entrepreneur and after years of research you come on the market with a revolutionary AI-based watch. The product is very well welcomed by the tech community and now you are planning the official launch. Provided that the product is patentable according to the patenting conditions and you apply for a patent, or you have already obtained it, the marketing impact on the customers could be extraordinary.

Labeling the product as “patented” or even “patent pending”, builds reliability and credibility and assures customers – both existing and potential– that the AI-based watch is (1) exclusive and that it (2) benefits from a new technology internationally recognized for its innovative character.

Besides that, obtaining a patent or even just having a patent application pending can prove a very effective deterrent in terms of ensuring that if a third party reproduces your work, you will have the legal grounds to take proper action against them. Of course, as a startup, having an IP portfolio may sometimes not be enough when trying to deter large companies that have the means and resources to challenge the validity of a patent in different courts, but might as well be enough to disrupt your smaller competitors. So, getting back to the example of the AI-based watch, if you are at the beginning of your startup journey and you have eventually obtained a patent in key markets (EU, Switzerland and US), this can provide further reassurance and stimulate investors to keep you on their radar.

And, inasmuch as patents can prove useful marketing and competition deterrence tools, they can also be extremely beneficial for establishing a reputation for your company, which can add value to your intangible assets’ portfolio and really boost your prospects of receiving investments. Any business angel or investor of any kind will always perform a due diligence over the IP portfolio of the company that they are looking to invest in, to ensure that the investment is safe and that the return of investment will be as expected and increase your company`s chances of having a solid exit strategy by being acquired by a large tech company.

 

Remarks

 

The current business environment is extremely fast-moving and there are major R&D and innovation projects that see the daylight in such a prosperous tech startup market, so it is crucial that if you own or intend to own patents, to make sure that you keep your patent updated, especially since patents take time, sometimes more than two years to be granted, and a lot can change in that time.

Competition is fierce and any gap of technology of your patent can end up being exploited by third parties, so buckle up, make sure you have done your research, that your patent is being constantly updated and that you are working with very diligent lawyers that can help you secure your patent`s place on the market and in turn, secure the future of your startup.

 

Note:

 

Paul Cosmovici is Managing Partner at Cosmovici Intellectual Property, European Trademark Advisor and member lawyer of the New York and Geneva Bars. He has experience in the field of Intellectual Property strategy, getting involved in commercial transactions, extensions of brand portfolios and in the protection of IP assets for multinationals, but also for start-ups.

 

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