Should You Pass on a Patent?

When is an idea really worth patenting and when is it better left alone?

Sometimes a patent does not make business sense. It’s a conversation I have frequently with potential and existing clients, and after a brief discussion, drawing attention to important issues they should consider, they often arrive at the conclusion that it’s not worth it.

At the outset, it is important to note that, many times for many different reasons, patents are difference-makers for companies. And until a decision is made not to pursue a patent, it is important to keep the invention a secret. If disclosing the idea to a third party is necessary, then a best practice is to file a provisional patent application before discussing the invention with others. At the very least, make sure the party you are talking to has signed a non-disclosure agreement (NDA).     

But when launching a business, patents are not a substitute for hard work, and patents may not accomplish the goals you expect them to. So, if you are faced with limited time and resources, and you are considering if a patent is right for you, consider these issues before investing your time and money.

When Is the Cost of a Patent Worth It?

Obtaining a patent can be an expensive, time-consuming pursuit. It is not unusual for the cost to file a patent application to exceed $10,000, and then it may cost another $10,000 to have the typical dialogue with the patent office that can go on over a period of years before a patent is issued. That is a lot of money.

So foremost, it is important to consider the total market potential for the product or service. Then, it is important to drill down, in a realistic way, to the attainable portion of that total market that is likely with and without a patent. This is an important consideration for both those that want to pursue licensing revenue and those that want to enhance sales in a typical business. 

So … To Patent or Not?

If the desired return on investing in a patent is a shortcut to licensing revenue without sweat-investment, then it is unlikely a patent is worth the pursuit. There are certainly people and businesses that have made a lot of money licensing patents, but the difficulty to do so should not be underestimated. The likelihood of being able to license a patent without putting in the effort to get proven, prior revenue going is very small. In general, there is no replacement for hard work. So, if the goal is easy money, pursuing a patent might not be a good course of action.

In the context of organically growing a company, the decision to pursue a patent is a very subjective one, but there are several important factors to consider when deciding whether to file a patent application or not.

Factors that weigh in favor of pursuing a patent include:

•     Infringement is easy to detect (i.e., it is easy to determine if someone is using the invention);
•     You want to promote the inventive aspects to distinguish your product/service from competitors;
•     The invention will be practiced by competitors (as opposed to customers);
•     Potential investors may place a high value on patents;
•     The invention is a technological, innovative advancement over the prior art; and
•     It is difficult to make a competitive product without use of the invention.

Factors that weigh against pursuing a patent include:

•     It is very difficult to detect infringement (e.g., an algorithm implemented in protected firmware and there is more than one way to arrive at measurable outputs);
•     Inventive aspects may be obfuscated (i.e., measures can be taken to prevent the invention from being reverse engineered)
•     Performance attributes can be promoted to customers without disclosing details of how the performance is obtained;
•     The invention relates more to a business approach than an improvement in technology; and
•     It is unlikely that competitors will independently develop the same solution.

Trade Secret Protection May Be Better

Most of the factors that weigh against pursuing a patent also weigh in favor of maintaining the invention as a trade secret. Advantages of maintaining an invention as a trade secret include avoiding the costs and distraction of obtaining a patent, while at the same time, not teaching others your invention (which a patent will do). 

Related: Protecting IP in the Food and Beverage Industry

If you can easily keep your idea a secret, you can avoid spending the money on a patent, avoid publishing your secret, and just take reasonable efforts to keep it a secret. For example, a SaaS-related invention that relates to an algorithm executed in the cloud may be best left a trade secret. 

An additional aspect that may push you to keep your invention a secret is “prior user rights,” which may be available as defensive protection against patent infringement for those who can demonstrate they were commercially using the invention for at least one year prior to the filing date of another’s patent.

Some other important considerations: 

•     Obtaining a patent does not give the owner the right to practice the invention. It’s a huge misconception that a lot of people have — that by virtue of having a patent, they’ll be able to sell their invention. That is just not true at all.  
•     A defensive publication may be just as effective as a patent if the goal is simply to prevent others from obtaining a patent.

Other Areas to Focus Your Resources

If you’re leaning away from patenting your innovation, then where can you focus efforts with limited resources? 

Competitor and industry analysis

Keeping tabs on the development work (patented and unpatented) of your competitors or other companies of interest can help avoid conflict down the road. Regular monitoring of these portfolios is relatively easy to do and may also provide insight into where others are focusing their development efforts.

Clearance and freedom to operate research

Because patents are not a shield against patent infringement, it is important to be aware of other’s patents. A freedom to operate search can help understand whether there are risks to practicing an invention. A prior art search will also help when deciding whether to pursue a patent and help to constructively frame the scope of any filed patent application.  

Branding and trademark protection

A focus on branding is almost always worth the invested time. And pursuing trademark registration may be a better business decision for some businesses because trademarks are relatively inexpensive to pursue. Instead of obtaining a patent right away, it may be better to obtain trademark registration on a solid, distinctive brand, focus on being the first to market, and claim some market share first.

And before investing time and money in building up your business under a particular name, brand, or logo, a clearance search, even a simple one, can go a long way to ensure that your chosen name/logo does not conflict with pre-existing rights of others. These include searching for your company name and products as well as domain name availability. Assuming these searches report back positively, consider filing trademark applications for your main company name and key product names or logos.

Copyright registration and notices

Although a copyright is an unregistered right, it can be particularly useful to file for a copyright registration if the work is something that may be tempting for someone else to copy.  Copyright registration is very easy, and enforcing your copyrights is much easier if your work is registered. In addition, the potential to recover statutory damages for any copyright infringement is contingent upon a federal registration before infringement occurs.

Related: Yes, You Need a Registered Copyright

Employee and confidentiality issues

In order to ensure that any individuals or contractors you hire will transfer their intellectual property (IP) rights to your company, adequate employment contracts, contractor agreements, or assignments are necessary.

As a rule, confidential information can no longer be protected once it is in the public domain so ensuring that your employees, contractors, and anyone you disclose confidential information to is under a written confidentiality or non-disclosure obligation is important.

Passing on a Patent

Patents may be an important piece to protecting IP, but patents are not a shortcut to success; hard work is required before any business succeeds. Virtually every business has limited resources to protect its assets, and many times patents simply do not make business sense when other IP efforts present a better return on time and money. If you feel stuck on which way to go, keep your invention a secret and set up a consult with your IP attorney to clear the air.