Protection Strategies for Growth-Phase Companies

Developing the right strategy for protecting intellectual property is vital to any starting company.  Equally important is revisiting your approach as the company grows and expands. Ultimately, what may have worked during the early stages may need refinement. Additionally, where cash is king for startups and allocation to intellectual property limited, new opportunities become available as a startup becomes established.

Once your company has grown, a more finessed approach should emerge. It is important to recognize that as a company brings on new talent and great minds, develops new technology and launches new products — new competitors are also emerging  — thus your IP strategy needs to adapt to your new and your competitive landscape.

A good place to start is to consider the following three questions: (1) Where and how is your innovation occurring? (2) What options do you have to protect your innovations? (3) What are your competitors doing? The answers to these questions may change over time, but reviewing your answers regularly can reveal how your IP strategy should evolve along with your company and its business goals.

How are you innovating?

With company growth come an expansion in R&D and the number of inventions that need protection. Generally there is new technology, new products, new features for existing products, and improvements of the technology developed during the early stages. It is vital to recognize that you can’t protect any of these developments if you don’t know what they are.

Successful companies develop internal processes for identifying innovations and evaluating them to determine whether protection is warranted. Identifying innovations may involve encouraging employees to report them, actively identifying innovations during technical meetings and reviews, and evaluating new products being developed to identify any new features or technology. Often public recognition and financial awards can be used to incentivize disclosure and reporting.

An internal review committee can decide which of the identified inventions should be protected — for example, by filing for patent protection or taking steps to keep the invention a trade secret.

How will you protect your innovations?

Priorities: What to protect

When there are many innovations, how should you decide which of them to protect through patents? Your business goals should drive this decision. For each invention, you should consider whether a patent covering the invention adds value to your company.  Creating barriers to entry for competitors can play a large role in success. For example, If excluding others from incorporating the technology into their products makes it harder for them to compete with your products, then patents should be strongly considered. A patent on a core technology, even if not yet part of any product, may attract investment or even an acquisition.

What about innovations relating to a technology that’s not currently the focus of your company, with no immediate plans to include it in a product? Here, patenting may still add value, because the technology may become more important as your company grows; business goals and products change over time. Additional factors to consider include (1) detectability of the invention (if it is difficult to detect whether someone else is using the invention, you wouldn’t know to enforce your patent even if you had one); (2) the cost and likelihood of obtaining a patent; (3) the amount of time and capital invested in developing the invention; and (4) the likelihood that others may be trying to develop and/or use the same technology, even if they are not your direct competitors.

Where to protect

After deciding to file a patent application, it is important to decide where to file it. Even for a growing company with a healthy IP budget, the cost of filing and, subsequently, prosecuting every patent application in multiple jurisdictions worldwide can be prohibitively expensive. Yet some technology should be protected both at home and abroad. Deciding where to file patent applications is critical to ensuring that the protection you ultimately receive provides value and aligns with your business goals so that the expenses are warranted.

Although the simplicity of a fixed rule may be attractive (for example, always file in the U.S., Europe and Japan), deciding where to file on a case-by-case basis is a preferable approach because different jurisdictions may be relevant to different technologies, and different products have different markets. Identify existing markets abroad, identify where you expect to make money, identify where you expect to manufacture, and consider jurisdictions where your competitors are doing or will do the same.

Also, an adaptive approach may reduce your costs. Spending less money on protection in countries where it is not as important to do so frees up resources to get the strongest protection possible for your most valuable IP in jurisdictions that matter.

Winning the Race: When to protect

With the America Invents Act (AIA) went in full effect, the first inventor to file a patent application is entitled to patent protection. As a result, patent applications should be filed promptly, as the current system is really a race to the patent office with some limited exceptions. You want to get there before any of your competitors.

Regardless of the AIA provisions, you should file your patent applications before any public disclosure.  For example, you should file a patent application on an invention before telling anyone outside your company about the invention and before releasing a product that incorporates it. On the other hand, if a technology is not yet mature and there is much development yet to be done, it may be worth delaying filing until the technology is more fleshed out or filing a provisional application.

Accelerated Examination

An additional consideration to keep in mind is whether to pay the patent office to expedite review of your patent application, which may be advisable for your most important technology and products. For a fee of about $2,000 to $4,000, the application will be examined within 3-4 months, on average. By contrast, without a request for expedited review, the application may not be examined for 18 months or longer.

What are your competitors doing?

When it comes to the IP rights of your competitors, what you don’t know can hurt you. As your company brings new products to the marketplace, you should consider taking steps to ensure that doing so does not infringe on the patent rights of your competitors or other companies. Understanding what is in the patent portfolios of your competitors and the IP landscape in general is key to avoiding surprises and reducing risk when commercializing products. Competitor landscape reviews may also provide valuable insight into your own patenting strategy.  To this end, many companies perform so-called “freedom to operate” (FTO) studies with the goal of identifying any potential IP barriers to market entry and the associated risks of future litigation.

An FTO study may be narrowly focused on clearing a particular product about to be launched, and may involve analyzing a patent portfolio of a competitor or doing a targeted search to identify patents having claims that may cover the product. FTO studies of a wider scope may involve searching for and analyzing a broader group of patents and patent applications to identify potential risks at early stages of development. The analysis may include considering whether a patent is valid and whether your product may infringe on any of its claims.

Consider the identification of any potentially problematic IP as an opportunity to manage risk. Options for doing so include designing your product around the identified IP, purchasing the IP or licensing the IP.

Intellectual property strategy should serve your business goals and adapt to changes in your company. Re-evaluating your IP strategy periodically as your business grows is critical to the health and continued success of your business.

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