Chris Poll, technical assistant at intellectual property law firm Gill Jennings and Every, explains how innovators can monetise inventions they can’t bring to market alone.
Game-changing ideas from sole inventors and startups in tech are often shelved because the costs of implementing them are too high. Sometimes, this is simply the reality of the market – some hurdles are too high to overcome. But too often, ideas are shelved prematurely because startups do not realise there is another path to monetising their product: through intellectual property (IP).
Some sectors are more challenging than others for innovators trying to realise their ideas. In heavy industry, for example, a small startup may have invented a brilliant, even revolutionary, piece of technology but the barriers to entry are high because that technology will make up just a tiny part in a massive infrastructure. If an inventor has created a component for a power plant or the electric grid, which the startup naturally doesn’t own, securing deployment for the technology can be near impossible. Companies with these types of “component” inventions, therefore need to find another way to monetise them – which is where IP comes in.
Many companies – both large and small – see IP solely as a costly way to protect their inventions. When we see patents, trade marks or copyright in the news, it is mostly discourse around one company suing another for infringement. This creates a distorted view of the purpose and value of IP, which can be in fact a valuable tool for startups and lone inventors who want to monetise their inventions but cannot bring them to market themselves.
Without IP, a startup or inventor simply has an idea. Ideas without protection can be easily replicated and – as far as any potential investors or buyers know – may already exist in the market. However, a patent transforms this idea into a tangible asset, providing evidence to potential buyers that it is novel – i.e. no one else in the market is doing the same thing – and inventive. Critically, it gives the startup a tangible asset that it can sell.
Furthermore, until a patent is granted, it can be tricky for inventors to judge whether an idea is likely to be commercially successful while also keeping it confidential. Inventors must be cautious when approaching prospective buyers or investors if they have not already filed a patent application. Non-Disclosure Agreements (NDAs) are often the first resort for those trying to avoid this problem. However, an NDA is only a contractual agreement between two parties, which still leaves plenty of room for others to swoop in on your idea.
An NDA is also not something you can hold up to a potential investor or buyer to show that you have exclusive rights over an invention. In terms of maximising the commercial potential of your idea, a tangible asset such as a patent application is of far greater value for a startup with an exit strategy in mind.
Even for startups looking to scale rather than sell, patents are a valuable asset as they can be used to attract potential investors. A patent can be used to support funding rounds as it demonstrates to investors that the startup has a long-term plan and tangible assets of some value.
Minimising the short-term costs of IP
Of course, as a startup, the focus has to be on keeping costs to a minimum while maximising opportunities. For those that are wary of the cost of a patent, there are some tricks to keep costs to a minimum.
For example, startups should know that they don’t need to file for the patent in every region they operate in, at least not for the first year. They only need file nationally, which minimises the short-term costs significantly.
This is because from the first filing of a patent application in a given market, the Paris Convention provides a 12 month period – the so-called ‘priority year’ – in which an applicant can then file in other countries worldwide and claim ‘priority’ from the original application. If a startup has its eye on exit, it therefore only has to pay the upfront cost of one patent application and the buyer can file for protection in future countries when that year expires.
Again, this is also a tactic that could be deployed for startups looking to scale, who can use that year to secure funding with the national patent application that they already have, and then use that investment to pay for global expansion once they have the funds in the bank.
Startups need to change their perception of IP. It’s not just insurance against someone taking your idea. It is, in fact, a brilliant tool for any startup to create and demonstrate its tangible value. It should not be underestimated, especially for those operating in an industry where bringing an idea to market is difficult and acquisition is the most attractive option for monetisation.
While it does require an initial investment in filing for a patent, this is rewarded time and time again by far greater returns on exit. And if startups are smart about when and where they file, even this initial cost needn’t be prohibitive.