Patents — Should we patent this?

Twitter Summary: Should we patent this?

Software patents their use and their mis-use have generated lots of heated discussion on the web. The Cato Institute recently released a document critical of the software patent process.  Tim O’Reilly has been using his media organization to spearhead efforts to reform software patent laws and why it should be done.

However, until these reforms are implemented every startup that invents a novel or unique “something” has to make the decision: Should we patent this?

In a cash strapped startup, patents are expensive and committing money for them gets prohibitive quickly.  Patents  cost $15K to get filed and another $15K in maintenance. In addition, they cost developer time in writing up the invention instead of spending time improving the product. Some of the cost can be deferred for a year by filing a provisional patent for a few thousand dollars, but that just delays the inevitable price tag.  If a patent is contested or you want to file internationally the price only goes up. Patents take several years before they are granted (if they are granted) and then you need to pay to defend them which will cost more developer time and legal fees.

Deciding what to patent can be as hard or easy as you want but it depends on the available budget. In a large company with a large budget for patents, there are the resources to build up an arsenal of intellectual property. There is typically a patent submission form, an internal patent review process, and eventually a prioritization for how well the patent aligns with the company goals.  Anything novel and unique would be considered as patentable and submitted so that they can be someday used as defense from other organizations, when the inevitable infringement lawsuit occurs.

In a small company with fewer resources deciding what to patent is simpler because you ONLY patent if your novel and unique approach is

  1. Directly attributable to your ability to make money, and
  2. You are willing to go to court to stop other people from making money using the same technique.

If your idea doesn’t satisfy both those constraints, then go on making software and with luck you will be able to avoid most of the patent issues that larger companies need to manage. For example, if you are an online advertising firm you would patent intellectual property associated with advertising and not spend the resources to patent a spell checker that isn’t tied to any revenue source.

Building up a patent portfolio for the sake of patent portfolio is not a way to be successful. Admittedly, patent portfolios can help with valuation of startup, but only if the organization has a viable business model which is independent of any of the patenting decisions.  For a startup company, if the patents do not satisfy the first criteria of being core to the money making ability of the business, then there is no point filing a patent since it will not have the resources in the long term to continue to build the organization, much less defend the patents.

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