Founder Fresh Takes #2 - Should you patent your great idea?
There might be a better way
A collaborative project by David Giltner and Paul West
When a scientist starts a company, they generally know that protecting their intellectual property is very important. But they often believe that filing patents to protect their ideas is the best approach to securing their ‘freedom to operate.’ Some view the filing of patents to be among the most import early-stage tasks.
If the new company has sufficient financial backing from a corporate partner or venture capital, they may be correct. But for most tech startups where professional investors are not involved, filing for patents uses valuable capital that may be needed for product development and marketing efforts.
This comes as a surprise to many scientist entrepreneurs because patents receive significant attention in the startup world. But there are several reasons patents may not be a good use of resources for a bootstrapped company.
The primary reason to not file patents is the cost. Patents are expensive to file, but they are even more expensive to defend.
Once a patent is issued, you have an obligation to defend the patent if you find that it is being violated. But patent litigation typically costs between $1 million and $3 million depending on the complexity of the patent. Many companies cannot afford this expense, even after several years of operation.
But if you don't defend the patent once you are aware it is being violated, you could lose your rights to your idea. Therefore, if you aren’t committed to defending a patent, then you probably don’t want to publicize your intellectual property by patenting it.
This leads to the consideration of holding the intellectual property as a trade secret. This carries its own risks, of course, as your secret could be leaked to another company who decides to use it for their product. This is why ‘need to know’ is so important in a company that maintains trade secrets.
Even worse is if the company that learns your trade secret attempts to file for a patent on your idea. If they are successful, you could lose your freedom to operate, and that could mean the end of your company.
However, there is a little-known strategy for mitigating the risk of your idea being stolen. You can publish your idea in an obscure place that is public, but very hard to find. You can even do this in a foreign language in a foreign county. This puts your idea in the public record without making it easily accessible.
Then if another company does attempt to file a patent on your invention, your obscure publication stands as prior art that could block them from being awarded the patent.
Intellectual property management is a complex game, with widely varying opinions on the ‘best approach,’ but companies with limited capital might consider this approach in order to free up significant funding for a more critical near-term use.
