Should Startups Pursue Patent Protection?

April 24, 2017 Gail Martin

For many startups, the decision to file patents is not an easy one. On the one hand, pursuing patent protection is a time consuming and expensive endeavor, requiring a significant upfront financial investment. On the other hand, patents can protect your proprietary technology from competition and generate value years down the road, not to mention attract investment and acquisition offers.

However, despite the large upfront costs, it is truly in a startup company’s best interest to build a patent portfolio. Beyond protecting technology, granted patents and patent applications are assets that can enhance that value of a company and its attractiveness to potential investors. For companies looking to obtain funding or get acquired, the strength of their patent portfolio (or lack thereof) is a key component in drawing investment opportunities.

Here are some things a strong patent portfolio can demonstrate to potential investors:

  • Security and Longevity

Patents can indicate to investors that a company can retain its competitive advantage in both the near future and much further down the road. Once granted, the term of a patent is 20 years, meaning that technology covered under that umbrella of protection will remain proprietary for many years. Thus, investors see patent portfolios as setting the stage for long term growth.

  • Monetization and Commercialization

In addition to protecting a company’s competitive advantage, patents can also be leveraged to generate revenue. Whether it is through licensing, sale or some form of commercialization, a patent can transform from a pre-grant cost center to a post-grant revenue-producing tool for companies. Thus, investors are very interested in the ability of a company’s patent portfolio to be monetized, and take that into consideration as a measure of a company’s ability to generate present and future revenue.  

  • Valuation & Acquisition

Aside from security and monetization, a patent portfolio can be a large factor in an acquisition scenario. A company’s valuation will in part be determined by the value of its patent portfolio. Portfolios with numerous high-quality patents that have opportunities for commercialization or that create opportunities for obtaining a market advantage, can greatly affect a company’s overall worth and the price of potential acquisition offers. Accordingly, companies looking to get acquired need to consider investing in filing patents in order to create a portfolio that is enticing to potential acquiring entities.

  • How to Start Building and Managing Your Growing Portfolio

To start growing your company’s patent portfolio, begin by filing provisional applications to secure the earliest possible filing date for your invention. This is particularly important since the US is a first-to-file country.

To help track and manage the various elements of the prosecution process for your startup company’s growing patent portfolio, you should use a software analytics platform, like LexisNexis PatentAdvisor®. PatentAdvisor offers easy-to-use solutions for startup companies looking to measure the strength and progress of their portfolio and get real-time insight into prosecution trends and strategies. These solutions can help startup companies utilize predictive analytics in order to determine what patent applications can best protect their technology and create revenue.

 

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