When To Apply For A Patent (And When Not To!)

ATMAC May 01 2014

There’s no doubt that patents can mean the difference between millions earned or millions lost; but before you run out and spend your hard earned money on a patent application, there’s a few key questions you should be asking.

Ownership

There are essentially two ways you can be entitled to ownership of an invention. The first way is if you personally contributed to conception of the idea (either working alone or with others) and do not have any obligation to assign your rights to someone else such as your employer. The second way is if at least one of the inventors assigns their rights in the invention to you. Patents always name the true inventors, but the entity applying for the patent (the applicant) is usually the person or company with ownership rights in the invention.

Patentability

You should also be reasonably confident that the idea is patentable, meaning it must be:

  1. Different in a least one way than what is already available to the public

  2. Useful

  3. ‘Non-obvious’ given existing inventions/patents

    For more information on these basic requirements of patentability see these USPTO tips:

    What can and cannot be patented?

    How do I know if my invention is patentable?

But just because you have ownership and the invention seems patentable does not necessarily mean that applying for a patent is always a wise decision.

Financial benefit

Regardless of your reasons for inventing your solution, money will be an important factor in deciding whether to apply for a patent. Like any investment, the possible financial upside of a patent should be much greater than the cost to successfully get the application through the patent office. Here are some ways that patents make money for their owners:

  • Business Valuation

    When it comes time to sell your company, it’s no secret that the more patents you hold the higher valuation your company will receive. This also opens opportunities for competitors to pay a significant premium to acquire your company along with its patent portfolio.
  • Partner & Employee Theft

    Before patenting (or at least an NDA) every person you share your idea with could copy your invention and start their own company. A patent covering key features would give you a virtual hammer to slam down in these types of situations.
  • Investor Confidence

    From Dragons Den to angel investors, one of the first questions is going to be pending patent applications. Investors need to know what the competition will look like and if you’ve protected their investment.
  • Legal Protection

    A defensive patent portfolio covers not only your own products but also features which competitors may want to add to their products (even if you don’t use those features yourself). This means that with these patents if a competitor sues you, you can sue them right back with one of your patents.
  • Reduced Competition

    Patents give to the patent holder a government approved monopoly for making, constructing and selling the invention to others. Thus the question will be if you can make more money if you eliminate competition but pay for patenting.
  • Licensing revenue

    If another company is using your patented technology you have the right to sue them. Rather than taking the case all the way through trial, the infringing company will typically be very interested in licensing your patents to get rid of the problem.
  • Converting Ideas to Cash

    Issued patents and pending applications can also be bought and sold just like regular property. If you hold a patent that is of interest to another entity, you can convert it to cash by selling your rights. Buy low, sell high is a typical way to make money with physical property. This can also work with patents.

As with any business venture, you need to have a plan for implementation and financial gain with a good chance of success. Patent applications have a fixed-maximum downside, but an open-ended upside making them attractive investments assuming you can capitalize on their potential.

After running through these questions your next step will be a professional review of your invention. We’d love to help!

Apply for a Patent Clarity Session