Tuesday, January 18, 2011

Startups: The Intellectual Properties dimension

This is a continuation of my startup series consisting of the prior posts of:

If you want to do a startup there are three things to consider for Intellectual Property:

  • Patents
  • Trademarks
  • Servicemarks


Patent means that some is new (novel) in how you are doing things. This may be something that seems minor like “One-Click” (Amazon). You can apply for patent on almost anything, and the track record for the US Patent office is that you will likely get one (even if the idea is really not new). Having one or more patents give the appearance of value to Angels or Venture Capitalists. A patent can also be used to intimidate competition. Odds are that any patent you get would be tossed out(unless really a new invention) if a competitor takes it to a court – but the cost is typically over one million dollars in legal fees. So, it may be cheaper for them to buy a license than to overturn the patent (interesting business model).

“Patent Pending” – means that you have filed a patent application. If you have not filed at least one patent application, then you will be fined if caught. Since you have up to a year after discovery to file a patent application, one technique is to file a patent application for something trivial and toss “One or more Patent Pending” on the software product and then delay filing for 11 months. Once you file, typically the patent documents are not available to the public for 18 months after filing … so the patent stays not-public for 29 months. On the flip side, someone may have already filed an equivalent patent which you will not be able to locate today…. If this happen, the person who can produce objective evidence of the earliest invention wins – provided that it was within the required 12 months of original patent filing.

Trademarks – You do not have to file an application to use a (tm) on your product. A (tm) means that you intend to use. a ® means you have filed an application AND it has been approved by the trademark office. Beware of trying to trademark items like “app store” or “email server”, they will generally be disallowed because they are too generic. Find a product name that:

  • Has not domain registration against it
  • Ideally will end up with zero hits on Google
  • Slap a (tm) after it and you are likely good to go for a while..

ServiceMarks or (sm) is for service offering (not product offering) and usually do not apply to products (but does to web sites offering services).

Bottom Line

Securing IP adds value to the firm, generally a lot more value than the cost (unless you go to expensive lawyers). Of course, getting the value out is another issue. If you get a patent, the patent can often be sold to “patent trolls” if the startup goes no where…

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