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Are patents valuable to tech startups?

I get asked this question regularly. Patents can and often do attract investors. They can also serve to deter others with similar ideas. Although it can be a costly endeavor, there are some great options, such as a provisional patent application.

We at LawTrades help clients navigate the maze of requirements, as well as select the route that makes the most sense – whether it’s a regular utility or provisional patent, or trade secret protection. It can be daunting, no doubt, but an experienced attorney can save you lots of money and time, while helping you to add value to your company.

While patents can be valuable, but they shouldn’t be the lynchpin of your startup tech’s business strategy. As a startup, your patent strategy is going to be considerably different than it’ll be for an established company.

An established company has the resources to evaluate its markets and customers. Moreover, it has existing distribution channels that startups lack. These are critical ingredients to assessing whether you should invest the enormous sums of money patent registration – and enforcement – requires.

For bootstrapping tech startups, there are alternative/more cost effective routes that can provide relatively robust intellectual property (IP) protection. Confidentiality agreements and trade secret protection can work just as well as costly patent registration, especially when combined with exceptional innovation design and speed. All employees, board members and advisors should be required to sign agreements obligating them to assign all business-related IP to the company.

You will also want to extend IP protection through agreements with non-employees, including vendors, outsourced designers and engineers, and testing facilities.

Contrary to some conventional wisdom that holds there’s deterrence value in patent registration, the reality is that large companies can – and do – often prevail in this type of litigation. Its value as a sword or shield is, therefore, debatable.

With all of that said, patents can offer a tech startup many benefits. It can attract investors and deter competitors.

In order to address the high costs, mounting litigation and general burdens associated with patent registration, Senators Patrick Leahy and Lamar Smith introduced a reform bill that was ultimately passed and signed into law in September 2012. The America Invents Act (AIA) is the single most important change to US Patent law in 60 years.

The AIA is likely most relevant to high tech startups with potentially lucrative patents. Significantly, the law changed US patent rights from first-to-invent to first-to-file for applications filed on or after March 16, 2013. The new law also expanded the definition of “prior art,” which is immensely useful for first-to-file patent applicants.

This law can be a game-changer for tech startups. Whether your IP assets are assets that should be protected with patent registration or with other strategies can best be determined with the assistance of an experienced IP attorney.

I encourage you to check out LawTrades for further guidance on how to determine the value of your patents. Also, please feel free to contact me directly with any concerns you have about registering your patent or protecting your intellectual property. I hope that helps and good luck with the startup!

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