What’s So Important About Patents?

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We get this question often. Early Stage companies typically think of patents and trademarks as cost items they can’t afford and can’t enforce. We get that. Our view, however, is that strong IP – trademarks, patents and copyrighted materials – are key investment considerations for Lateral Capital. Here’s why:

  • Your claim to Intellectual Property tells others that you plan to practice your own technology. If you don’t put others on notice that you regard your IP as yours alone, you may wind up treading on the intellectual property of others because they don’t know you are there. In fact, the first value of patents is to ensure you can practice your own technology.
  • Strong IP helps defend the company from competitors while the business grows. Even the words Patent Pending on your device or service will serve to make people think twice about invading your space. Are you going to sue them? Probably not. What you are really buying is time.
  • Intellectual Property, particularly patents, is vitally important to large corporate buyers. Big companies who have the legal staff and financial resources to defend what you have invented. Where there’s a legal department, there’s a lawsuit!

Some key thoughts about Patents:

  • Patents represent the right to exclude others from producing or selling a product exactly the same as yours. Not similar to yours; exactly like yours. The definition of “exactly” is found in the Patent Claims. That’s where you need to focus your attention and where your Patent Lawyer earns his or her salt.
  • To get a patent, you have to disclose what you have invented. Once a patent is filed, you have agreed to tell the world exactly what you have invented and why it is better than other solutions to the same problem. Once the patent is filed, not necessarily received, it is public. It is also your stake is in the ground and you are free (but not required) to tell anyone about the patented invention.
  • The first and most important benefit of having a patent is the right to practice your own technology. Many companies forget this. They say “I don’t want to disclose my invention – I’ll keep it secret.” This is fine until someone else invents the same thing – and patents it!
  • Investors want to know what about your business is patented – or patentable. But they will also want to know whether your patent – or other aspects of your product of service – infringe on the patents of others. This is called “Freedom To Practice,” and is often abbreviated as an FTP opinion from a Patent Lawyer. This opinion can provide comfort to investors on your ability to practice what you have invented. The cost: typically $30,000-50,000, depending on the size of your patent estate. One reason this is so expensive: The insurance policy which backs up your law firm (and you) is very expensive.
  • You can speed up your patent process by filing an Accelerated Application. Accelerated patent applications can be “bought” for an additional fee of about $5,000. This assumes your willingness to provide more information with the initial application on “prior art” in your area. Basically, you are helping the Patent Examiner more quickly review your file. Information on prior art which is close to yours is essential and helps the examiner to know why your “claims” are reasonable and why you should have freedom to operate. (Ask your lawyer for more details on how this works.)

Some key points about Copyrights:

  • Copyright is established any time you put pen to paper, draw something, write software code, etc. By creating it, you are entitled to copyright protection.
  • To remind people of this, you may put © and the year with your name or company name at the bottom of any page or website address where the copyrighted material is shown.
  • There is no registration requirement – or even the opportunity to register copyrights. It is yours to own and defend. But copyrights can be very valuable. Just ask the Walt Disney Company. Their company has used copyright law to keep Mickey Mouse out of the pornography business for 50+ years.
  • Your copyright lasts for a long time – 70 years past the death of the owner/author.

Some key points about Trademarks:

  • In the United States, different from most other countries, federal trademark rights are established by using the mark to define your specific product or service. Registering your mark with the PTO – Patent and Trademark Office – simply tells the public who is claiming exclusive use of the words, illustrations, etc. and for what product classification.
  • You can get a ® (meaning a Federally Registered Trademark) designation for your mark only after you have proven you are using the mark in interstate commerce. But if someone can prove they were using “your” trademark to describe something similar before you were, they can get your ® removed from the registry of marks. If they can prove that your mark is “confusingly similar” to theirs – usually based on simple research – they may be able to get a court to stop you from using the mark.
  • No, spelling it differently doesn’t count: Kuik-E-Mart (“The Simpsons” spelling) and Quickee Mart would be confusingly similar. And speaking of confusing, The Simpsons could probably use the name Kuik-E-Mart without either registration or legal right under some combination of free speech, parody and “fair usage” statutes.
  • Said another way, and even though it’s expensive, finding a good Trademark lawyer is very much worthwhile. We recommend John Parzych at Fredrikson & Byron (jparzych@fredlaw.com).

 

IMPORTANT DISCLAIMER – This material is for general background only. It is not legal advice. Readers are strongly encouraged to seek the advice of qualified legal counsel before acting on any information contained herein.

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