What You Should Be Working On: Patents
Build Value in Your Company Through Inventions
This post is the fifth in a five-part series on what you—the entrepreneur—should be working on right now. In-case you have missed the previous articles, please check them out:
The premise of the series is straightforward: You should be increasing the value of your company by treating the company as a product that you want someone to buy. Creating and owning intellectual property can have a major impact on the value of your company and make it more attractive to a potential buyer.
For example, a potential buyer would likely want their products to be protected from competition in the marketplace. Perhaps the best known form of protection is a patent because a patent gives you a mini-monopoly. This mini-monopoly is the best way to protect yourself because, well, a having patent makes it illegal for someone else to copy your idea for a period of time, giving you the opportunity to reap the financial rewards from your idea. But many business owners think their company could never invent patentable inventions so they don’t even try. That is a mistake.
What Is Patent?
The founders of the United States considered patents to be such an important aspect of commerce that they drafted right into the US Constitution a mandate that Congress devise a plan for issuing patents. A patentable invention must fit into one of these types of ideas: (i) Process, (ii) Machine, (iii) Article of Manufacture, or (iv) Composition of Matter. You can also get a patent on improvements to any existing patent on one of these areas. The protection provided by law is that only the patent owner may authorize who is allowed to make, use, market, sell, or import the invention. That monopoly lasts for 20 years from the date of filing the patent application.
The procedure for obtaining a patent is very technical and time consuming; therefore, it costs a lot in lawyer fees. It is this last point that keeps many people away from applying for patents. But I don’t think that should be the deterrent it seems to be.
Due to misunderstandings about patents, many entrepreneurs create objections to pursuing them. Here are a few FSOs (frequently stated objections) and answers that should help demystify the patent process and put the pursuit of patents back on your radar screen:
Objection: “But I don’t have ideas that are good enough to get a patent. And my employees sure don’t either. Why should I spend money on pursuing patents?”
Answer: Every company that works with things — from plumbers to publishers of software — has the potential to invent something patentable. It might be a new tool, or an improvement to an existing one. It might rely on the unique application of a technology that was not available a few years ago, or it might involve a novel use of an old technology. (I have a friend who discovered that vitamin C, when used with other chemicals, removes chlorine from swimmers’ bodies, a novel use for which he applied for a patent. Check out SwimSpray.)
Objection: “But, the cost! Applying for patents is prohibitively expensive!”
Answer: The truth is that if you committed your company to filing a new patent application every year, you’d probably pay about half the amount you pay your secretary in wages and benefits. And after 10 years, you could have a portfolio of patents that would contribute dramatically to the value of your company.
Objection: “Doesn’t it take a long time to get a patent?”
Answer: Yes; it can take over 3 years. But as soon as you apply for your patent you can say that you have a “patent pending.” That can be a good marketing advantage for you. After a few of years and few patent applications to your name your company will become known as innovative; customers and potential buyers like to work with innovative companies. Even more importantly, your innovative company will be doing exactly the things that help to keep competitors cornered.
Objection: “I’ve heard that it costs even more to defend your patents. Why bother if other companies are just going to infringe on my inventions and I don’t have the resources to defend myself?”
Answer: This one is the silliest objections. It is true that patent infringement litigation is very expensive. But if your patent can be defended, you stand to recoup the damages you’ve suffer because of the infringement. The logic in the question is almost like never buying a house because its value could go down or never locking the door to your home or apartment because someone might break in. If you have a patent and someone infringes on it, you can always decide at that time whether that patent is worth defending. By not obtaining a patent on your invention you eliminate the possibility to experience any of the benefits of property ownership. What’s more, once you have a patent you could find a deep-pockets company to license your invention, one who would help you defend it.
What You Should Be Working On Now
Pursuing patents makes you do things you should be doing anyway. In order to get a patent, you need to understand your industry. What are the recent advances and what changes are coming? What are your competitors doing that could close you down in the future? What techniques from other industries will creep over to yours to disrupt things? Of course, when I write that you should be doing these things, I mean that you should have your employees be on the lookout for these things.
You don’t have to have a research and development team of PhDs to pursue patents. Your regular people–the dedicated ones–are immersed in their craft. Some of them will recognize an unfulfilled need for a new product that would help them get their jobs done quicker or with better accuracy. Opportunities abound even in seemingly old industries. (Consider that a patent application for a new plier apparatus was recently submitted–See US patent application No. US 20150007700 A1.)
If you have established an environment within your company that encourages all of your employees to come up with new ideas, more of them will become inventors for you. Even if they do not invent something patentable, through the inventive process they may find some almost perfect tool already on the market that will help them do their jobs better. You win either way.
Do not overlook the possibility of filing patent applications on a regular basis. Patents are within the reach of most companies; you and your employees just need to look for the right opportunities. The results of having a policy in place that forces your team to actively pursue patents will help everyone focus on creating value in your company.
Argent Place Law, PLLC serves entrepreneurs and entrepreneurial organizations in matters of business and contract law, intellectual property law, and succession planning, including estate planning with wills and trusts.
Argent Place, the silver lining where ideas are transformed into wealth.