Should you patent your start-up’s technology?
We as OpenOcean have our background in MySQL and MariaDB. Back in the day, Monty, our founding partner, used to say that software patents hinder innovation and are only good for corporations looking for protection from disruptive startups.
But are they any good for startups? We decided to get some expert information and invited Gina Cornelio, partner at Dorsey & Whitney and a seasoned patent attorney in the technology field. She sat down with Patrik Backman, our Managing Partner, at our Annual Summit in London to answer questions about intellectual property protection as there are also differences between the US and European markets. It turned out patents are a pretty controversial topic and raised quite a discussion among our attendees, including of course the MySQL founders.
What is the purpose of patents and why should start-ups care?
Mature companies that have been purchased or have a strong revenue stream may care less about patents, they might even think that filing for one is a waste of resources on something they won’t even be able to defend in court.
“But for a start-up seeking funding” as Gina said, “patents show that you have a technology you have invested in and have an asset your company can build value around. Even having just a patent strategy can improve investment evaluation.”
Gina points out that “as your start-up grows, you have something you can rely on, to protect against competitors, which is especially important as you start taking market share.” Patented solutions can be a basis for a licensing partnership across different fields. Certain partnerships then only work if you have something to license. Against competition — it lets you stick a flag in a certain market share if you have an innovative solution for it.” The patent is an option to defend against stronger competitors who could copy your technology, enter the market with new features potentially faster and with a more sophisticated approach.
Will you even get it?
Both, EPO and the US patent offices, expressly prohibit software patents. You can’t patent code or software. However, you can patent your real technical innovation — a solution to a difficult problem, unique design or interface, as Amazon did with 1-Click Ordering or Apple with the iPhone shape. Even if it is only an algorithm, there are options to frame your innovation as a technical achievement and tie hardware in a way that will clear the prohibition hurdle. Unfortunately, you´ll need skilled support to frame this properly.
Timing is everything: what is critical about public disclosure?
“You need to file your patent application before public disclosure of your technology.” Gina points out.“That is, not only before release but even before you start pitching to investors or even talking to customers, without an NDA in place.” Actually, any non-confidential discussion and for example, an operational and functional app can count as public disclosure. If you do not file before your release, you effectively wave your rights for a patent.
In the US there is a grace period of one year for filing after public disclosure. But the EU doesn’t have a similar policy.
File early!
Gina recommends you can start by doing a patentability search i.e. the patents currently in place in your field. However, if you’re looking into patents just as an asset for company evaluation, this is probably not worth your time or money, as it takes many hours of reading legal jargon and it’s also something that’s done in the filing process by the patent office. You pay them for doing so, therefore do not waste your resources on this.
Gina’s advice: unless you plan on enforcing your patent in the future, just file and raise money for your company. Keep in mind that if you do proper research and know of patents and continue to infringe them, you can get sued for patent infringement. Having known about the protected property beforehand can triple your penalty, at least in the US.
The official fee of $150 will get you a US provisional which allows you to submit a confidential application without any information disclosure before filing for a regular patent, thus earning the right to claim you have a ”patent pending”. Provisionals can require less attorney time to prepare than “full” patents and can give you a headstart in the filing process and in the 12 months you can disclose and validate your technology and business model before deciding to file a full application and pay for an actual patent. It also gives you time to raise funds for the patent fee. Additionally, this will support a priority European patent filling and preserves that question whether a feature is worth patenting or not.
If you file, the final decision whether you can patent will take as long as six to seven years. During that time you have a patent pending, which can be helpful for your evaluation and engaging with investors.
Open Invention Network, or licensing pools?
In contrast to patenting your technology for your company only, you can also choose to power the network by joining a licensing consortium like Open Invention Network. The Open Invention Network is a licensing consortium based around the Linux platform to enable royalty-free access to Linux System patents for its members. By joining you decide to give all your patents for a license-free royalty and in exchange gain access to all the other patents in the pool. Big players as Google, SAP, IBM, are members, Microsoft just joined. We from OpenOcean support the patent non-aggression community and MySQL had moved its own patents into the Open Invention Network. Nonetheless, Gina points out that although there is a lot of benefits being in the consortium with some of the comforts to feel free to develop around Linux, for a start-up, this means you’re basically giving up your biggest asset, your technology, for the biggest competitors to access and use for free. You can still carve out some control over the IP with an Open Source license, but this is not the way if you want to protect your technology as a whole.
Lawyering up.
Frankly, from the start-up point of view, you have a very slim chance of getting sued for patent infringement until you have significant revenue and market share. And then it is possible that you would be sued on the grounds of copyright than patent infringement, like copying a part of the code for example. It´s usually competitors that use the tools available to win over the other party when they become stronger. Nowadays, there are insurance policies to protect against patent lawsuits, too.
Takeaways: Is it worth it?
Aside from improving your investment evaluation, having a patent can possibly become an additional revenue stream — there are cases you don’t hear about, where small companies settled with a big competitor that used their patented technology and received royalties for its use. Also licensing partnerships may be heavily affected by whether you have your technology patented.
So if your technology has the potential to be copied for a competitive advantage and you can afford the legal costs — think about it latest when getting ready for your next investment round, before you share your software idea with potential investors or users. In the end, patents are only one piece in the puzzle of succeeding as a start-up.
During the Annual Summit, OpenOcean brings together the most ambitious entrepreneurs, tech leaders, academics, and visionaries of technology who are shaping the European tech. We connect to talk about deep tech, delicious software and scaling into industry-defining global winners. We raise discussions around topics that affect founders and growing teams, data scientists and investors to foster communication within our network which can lead to fruitful collaborations.
This is a series of topics and discussions raised during the summits.
