BlueIron is a patent financing company that specializes in providing startup companies with access to capital so they can pursue and ultimately obtain patents. Patent attorney and BlueIron CEO Russ Krajec recently went on the record for an interview. Part 1 of our conversation published at Patent Financing: An alternative path to protection for startups.
In this final segment of our 2-part interview we pick up our conversation discussing Krajec’s new book, Investing in Patents. We also discuss provisional patent applications and the unfortunate reality that many, if not most, simply do not provide much useful priority benefit because they fail to adequately describe the invention. We also discuss various prosecution strategies and end with an important take-home message. Getting a patent is not the goal. Succeeding in business is the goal, getting a patent is just a first step along the path to business success.
Without further ado, here is the final segment of my interview with Russ Krajec.
QUINN: I also know that you’re an author. You’ve written a book that describes due diligence. Where does that fit into what you’re doing? Are you trying to educate the companies you work with or trying to educate the inventor populous and startup companies? How does that fit in?
KRAJEC: The book, Investing in Patents, is really targeted at investors, either angel investors or venture capital investors. The book goes through our model for how we view patents as assets and how we do our due diligence there on an asset, including if we’re going to pick up prosecution on a patent or how we do due diligence on a brand new invention. The point is to educate investors so that they’re better in many ways, including so that they could evaluate their own investments. The book also is applicable to a start-up CEO, independent inventor, or entrepreneur as well, although in the future I plan on doing a book targeted to them with more specific information.
QUINN: Yes, I know one of the themes in the book because we’ve been publishing some excerpts from the book on IPWatchdog.com, so I know you have a dim view of provisional applications. And I understand why, I mean, I have my own view of provisional applications. I think provisional applications are absolutely wonderful if they’re done properly, but probably 98% of them are just simply not done anything near properly, and that comes with real costs. I don’t think people really understand what the costs of a poorly done provisional really is.
KRAJEC: I agree with you. I do agree that provisionals have their place, and I think there are some business cases for them. For a startup company, however, they’re most precious asset is time, and the faster they can get a patent issued, even if it’s not very broad or even if it’s not very good, that patent has a ton of value to that startup. A startup company is not worrying about five or ten years from now. They’re trying to get through this month or this year. And, the faster that they can get a patent issued, the more value it’s going to have for them, and I’m not against provisionals per se, I don’t like them for startups mostly because they waste time.
QUINN: Well let’s go and take another step forward, what do you mean about them wasting time? I ask because I think it’s completely true to say that startups are starved for time. I’ve also always thought that there is an exactly right time to be considering using a provisional patent application, and particularly now when you’re in first to file world. If you have something that you have right now that you know is unique enough to be patented, but you’re not yet done working on it, and you think that over the next several months you’re going to continue to work on it and improve it and make it better, that would be a perfect opportunity to file a provisional patent application, but you can’t just go and throw something at the wall and see what sticks. It can’t be a single paragraph, can’t be two paragraphs, can’t be a Power Point presentation. It’s got to be a meaningful disclosure that adequately describes what it is that you have invented up to that point, with as much detail as you would put into the non-provisional application. Then if you want to plant that flag, get that filing date, and then keep working on it and then when you reach the point where you’re done or you’re getting close enough to the one year anniversary from the filing of the provisional, then you got to file the non-provisional. But if you’re done with the invention, if the invention is already done and/or you’re selling it already – god-forbid and you haven’t filed something – you really need to be thinking about filing a non-provisional. And god-forbid you’ve already disclosed it and your selling it or disclosed it, which a lot of startups do. They still don’t understand what first to file means. At that point, you’ve got to just file – hire somebody to do this right and file it and get it filed properly.
KRAJEC: I agree with you. I have changed the way of written patents some over the years. Now, I start with a single point of novelty that I want to go after. And once we figure that out – whatever that point of novelty is – we can do a bunch of patent searches for that point of novelty. We then construct the entire patent application around the point of novelty – and nothing else. The other thing is, I don’t really care what the company’s product is. I am really trying to describe how every competitor use this same technology. So, I’m not really trying to go through and document exactly how they built their exact implementation. I’m going to step back one level and say, “Here’s my point of novelty, how are different markets going to come in a use them?” And if I can go through that thought process, I’ve got enough for a non-provisional right now, and I’m not worried about working on it later. I prefer to file a non-provisional now and I’m out $720 in filling fees for a small entity. Or, I can file a provisional, then wait a year and do a non-provisional. I still have to file that $720, but if I file the non-provisional today and we have some new insight or new customer feedback or new market traction, I can always file a continuation-in-part application three months from now, a year and a half from now, two years from now. I can do it when it makes business sense, and I don’t have this artificial one-year date where I’m inherently waiting to start the clock. From a business standpoint, it seems like we’re so much better off to write a good application and use the continuation option if necessary later on.
QUINN: Well certainly if people are thinking that provisional patent applications are an option to do it without effort, that is a huge mistake. But, I guess – and maybe you don’t do any biotech stuff, or maybe rather than assuming I should just ask you: do you envision doing biotech related inventions using the BlueIron model?
KRAJEC: Yes, we’ve done a couple of applications that are in the medical device area. We’ve done a couple that are in the in the medical products kind of arena, even touching on the pharmaceutical end of things.
QUINN: Maybe it’s because so many in the biopharma area are using the PCT, which comes built in with the 30-month delay if you want to use it all. But if you’re not using the PCT, maybe a provisional there could be a somewhat useful as a strategy. But I suspect, you know, we’re splitting hairs because so many of those companies are using the PCT, because they’re thinking world-wide. And they’re looking to delay for the 30 months, which is great because then they’re going to get the full opportunity to really see whether this is something that’s going to play-out and whether continuing to invest in it makes sense.
Shifting gears a little, the interesting thing about your model is it seems more like you’re a part of the team than with a traditional fee-for-service model. I say that because there’s so much strategizing that can go on today with the patent attorney, whether it be from with respect to writing the application or whether it be with respect to prosecution strategy. Is this an application we want to pay a little extra to speed up or is this an application we want to slow down a little? Is this an application where we want to take with the examiner’s giving us, or one that we want to continue to fight? Is this an application where we shouldn’t file another RCE because we’re never going to get anything through with this examiner? And if it’s still worth fighting, we have to really appeal. There are so many strategies, and we haven’t even talked in this little segment about first-to-file and the changes there and what that means and now the new Federal Trade Secret Law. There’s so much strategizing today that a patent attorney who’s a part of the team can really do, but if you’re paying for services – a fee for service model – that isn’t always feasible, because at the end of the day, there’s only so much time and money you have.
KRAJEC: So, I went from being outside counsel to being in-house counsel at a startup company that I co-founded. Sitting on the inside, makes everything crystal clear, because the patent strategy matters. That strategy is how we as a company are going to be successful, and so, it doesn’t make sense for us to delay getting a patent using the provisional route, but maybe it makes sense for us to take the first allowance that we can get and then do a continuation-in-part or whatever that strategy happens to be. We do it based on the value to the business. When you are outside counsel, your only real motivation is to get paid, and it is the client’s responsibility to determine the strategy. Does it make sense to go up on appeal or file an RCE and kick the can down the road? As in-house counsel, that decision is made based on the quality of the argument and the value of the asset, not based on the cost.
QUINN: That’s right. Anymore the right decision may be to go on appeal. Because I see cases sometimes where literally five, six, seven RCEs have been filed. You know, you’re well past the point where you’re going to convince this examiner to issue a patent that you would be willing to accept. But when you’re getting paid for the service, and you’re saying what we need to do is appeal, I wonder how many times the client is really hearing, “What you need to do is help me pay for my kids to go to college”? And the decision is made – just file another RCE. And I think unfortunately, unless you have people on the inside of the companies that are real good consumers, meaning to some extent they have some familiarity with the laws and the process. It’s like ships passing in the night and you almost cannot be anything more than that.
KRAJEC: Right. You know, my favorite strategy when I was in-house counsel was to use the pre-appeal conference, especially if I was right and I had a legitimate argument. I use the pre-appeal conference as much as possible. I’d even use it in the second office action if I had a second non-final, and, if I was right, I’d use it right away. And, I found those kind of strategies as something that would be very difficult to explain to a client and convince them that we’ve got to do it, and then, of course, send them a bill for it, too. Because they don’t like getting the bills.
QUINN: What’s the one take away message you’d like people to remember? So, what is the one thing that you would like entrepreneurs and startup inventors to really understand and know about the process, about the availability of capital, about what’s facing them moving forward?
KRAJEC: I think first and foremost, getting a patent is not the end goal. Using an issued patent is not the end goal. It’s the beginning for the startup. Think about how you are going to use this asset in your business, and then craft that asset to match that business goal. When you do that, you make much better use of your time and energy. So many people who are looking for a paper trophy or a plaque on the wall, and they don’t understand what they’re going do when this asset shows up, and if that’s the case, why bother doing it?
QUINN: I couldn’t agree with you more. I mean, if what you want is something to hang on your wall, that’s fine. But you have to go into that eyes wide open and realize it’s going to be a very expensive plaque on the wall. Getting a patent is not the goal. I always tell people, when you are getting a patent there will be no money truck showing up at your doorstep to unload right on your front door. Getting a patent is the beginning, and to some extent that’s the easy part, right? I mean, this is the part that you can control. You can’t control the market. You can control the inventing to a large degree. You can, maybe not control, but greatly influence the patenting process. But once you’re to the point of commercialization, you’re at the whim and fancy of a whole lot of forces that you have no way to control and largely no way to influence.
KRAJEC: Yep. Absolutely. Well put.
QUINN: Well, thank you so much for taking the time to chat with me today, Russ.
KRAJEC: You’re welcome. Thank you.