Good morning startups, entrepreneurs, and independent inventors. Over the weekend I was playing Risk (we’re so cool) with some friends who work in the patent industry when one of them said to me, “I like your website but you haven’t answered the most basic question your audience wants to know, “what is a patent and why is it important to my startup?” So here we go, brought to you at the suggestion of the talented patent attorney Chris Kokoska from Palo Alto, CA.
What is a patent?
A patent is government issued right to exclude others from making, selling, or using your invention. It’s a legal document that outlines your proprietary technology. For a startup like yours, a patent is a weapon that can be used offensively or defensively. It’s a weapon that can be used offensively by either demanding a license from companies that use your patented technology (revenue!) or by suing competitors who use your patented technology without permission. On the flip side, a patent is a defensive tool that can be used to warn competitors that if they assert a patent against you, you will respond by asserting a patent against them. It’s a lot like the game Risk!
Tell me why a patent is important to my startup!
Well I may have just answered that question in my answer to “what is a patent?” However, there are several more reasons why a patent is important to your startup. Outside of using a patent offensively or defensively, a patent increases the value of your startup. As I’ve said in previous posts, a patent provides legitimacy to your startup. It signals to investors that you have valuable proprietary technology. By not having a patent on your proprietary technology, you’re suggesting to potential investors that you don’t have anything proprietary to add to the industry. Why would an investor invest in a tech startup that doesn’t have proprietary technology that can shake up the existing industry? Investors expect a technology startup to have at least one patent on their core product. In today’s patent crazed tech industry, it’s often a minimum requirement for investment.
If you need further motivation, consider this: Nortel was once one of the leading companies in communication technology. You don’t remember Nortel? Neither do I. They were out maneuvered by Cisco and made some poor business decisions. When they went bankrupt in the late 2000’s, Nortel sold their patent portfolio to a consortium of businesses for what is still today the largest price paid for a patent portfolio, 4.2 billion dollars! The point I’m making is that a patent not only protects your interests, but its a tangible and valuable asset when you look to sell your company.
In summary, your startup needs to consider patent protection because:
- It helps convince investors that you are legitimate and have proprietary technology
- It can be used offensively and drive revenue by demanding licenses from competitors using your technology
- It can be used defensively to protect your company from competitors
- It has tangible value that can be sold off.
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