EDITORIAL NOTE: What follows is a condensed version of Chapter 1 of Goldstein’s book, published by the American Bar Association, titled Consumer Guide to Obtaining a Patent.
In simple terms: a patent is a grant of rights by the government, for a limited time, that can be used to stop others from making, using, or selling your invention.
Here’s where we can begin separating myth from reality: having a patent does not give you the right to legally make your invention! Said differently, having a patent is not a requirement for you to make or sell your invention!
What a patent can do, however, is give you the right to stop others from making, using, or selling it without your permission. Now that this is clear, we can take a look at whether the ability of a patent to stop others from making, using, or selling your invention is important enough to your goals to justify your decision to patent it.
Reasons to Patent Your Idea
Right or wrong, here are some common reasons people and companies seek patent protection for an idea:
- The fear that others will steal it
- To generate licensing revenue (royalties)
- To prevent or reduce competition
- To maintain or acquire market share
- To enhance company valuation
- Because investors want it
- For business credibility or marketing
- For personal credibility or vanity
- For the experience
- Because someone told you that you should
- To avoid infringing someone else’s patent
Knowing your reason can help you decide whether it is worth the time, money, and effort to seek a patent. It can also help you and your attorney pick the right strategy in the beginning of the process, as well as make appropriate decisions along the way.
Let’s consider the merits of each of these common reasons. As we take a closer look, some of them are more compelling than others. When people talk about diet or exercise, they generally talk about “healthy choices” and “unhealthy choices” (rather than “good” and “bad”). So let’s talk about these reasons in that way. As an entrepreneur, for your business, some of these reasons are “healthier” than others. Let’s just say a few of them are somewhat unhealthy—and at least one of them is dead wrong!
The Fear That Others Will Steal It
Immediately after realizing “I have an idea,” nearly every inventor thinks, “But I don’t want anyone to steal it!” With the notion that patenting is the way to stop other people from stealing ideas, many inventors quickly decide: I need a patent.
Ultimately, there’s nothing wrong with seeking a patent to avoid the devastating experience of knowing your idea was stolen. It’s helpful, however, to know whether that’s your primary motivation. Knowing your motivations gives you more choice in the matter—and then at least you’ll be clear about what you’re paying for!
To Generate Licensing Revenue (Royalties)
A frequent strategy for profiting from an invention is to find a company that will manufacture, market, and distribute the product, and pay the inventor a royalty. This highly sought-after arrangement is called licensing.
If your prime reason for seeking a patent is to license it, there are a few things you should consider. First, you must be the one to find a company that wants it and is willing to pay you for your idea. In particular, you will need to find the right person at the right company—a person who appreciates the value of what you have created and is in a position to manufacture, market, and distribute it. Finding this person will require that you knock on some doors. Before pursuing a patent with the sole intention that you will license it, ask yourself: are you prepared to spend time knocking on doors to find someone willing to license it?
To Prevent or Reduce Competition
As an entrepreneur launching a new product, you want to sell as many units of your product as you can. Clearly, your efforts can be slowed by others competing for the same customers. Preventing or reducing that competition could make selling your product a lot easier.
One of the great benefits of even just applying for a patent is the uncertainty that it creates for your competition. When it’s not clear whether they can safely copy your product—because they don’t know exactly what’s in your patent application—they are less likely to make the risky decision to copy it.
To Maintain or Acquire Market Share
Similar in concept to preventing or reducing competition, a patent on an important feature can be your foot in the door in a very competitive market. It can also be the reason why a winning product remains relevant in the marketplace.
The key is to patent the feature or features that make a difference and provide a solution to a widespread problem. Providing such a solution makes a product highly desirable in the marketplace or helps maintain its stature. It’s this overlap between marketability and patentability that provides the basis for the most valuable patents— and that can have the greatest impact on market share.
To Enhance Company Valuation
When there are patents involved in the key business of the company, and the company owns those patents, they are the part of the business that others can’t replicate. So the finance people can no longer calculate value as just what it would take to build up a company like yours. If you own the key technology, you become “the only game in town.” Suddenly, the value of your company multiplies!
On this principle, a portfolio of patents can increase the value of a company, provided they are good patents and relevant to the core business model. Moreover, this portfolio can be a great bargaining chip if you decide to sell your company.
Because Investors Want It
On the popular TV reality show Shark Tank, individuals pitch billionaire venture capitalists to invest in their fledgling companies. When it’s a product that the per- son is requesting for the “Sharks” to invest in, the first question the Sharks often ask is, “Do you have a patent?”
This is a common question from investors who aren’t on TV, too! Potential investors in your idea or company will want to know that you’ve taken steps to protect your idea.
For Business Credibility or Marketing
To potential customers, knowing your product is patented can increase its stature in the marketplace. Often, product advertisements proudly tout that a product is patented. They do this because many consumers perceive a patent to be a “stamp of approval” from the US government. While it’s not really true that a patent indicates government approval or endorsement of a product, having a patent is often perceived as an indication that a product is innovative and exclusive.
For Personal Credibility or Vanity
Some people seek a patent on an idea just to hang the certificate on the wall—to be able to say, “I have a patent!” There’s nothing wrong with that, but keep in mind that patents aren’t cheap. It can be pretty expensive wall art. If you’re into that, it is kind of cool to have one. And it’s definitely something to be proud of!
For the Experience
Pursuing a patent on an invention for the sheer experience of it might be one of the best reasons to do so! For a serial inventor or fledgling serial inventor, the education you would gain just by going through the patent process may be well worth the investment of time and money. Often, when people are successful with an invention, it wasn’t their first invention or their first attempt at launching a product that found success—it was their second, or even their third! However, the first time they went through the process was a valuable experience.
Because Someone Told You That You Should
Yes, it’s true. When many people seeking a patent are asked why, the best reason they can give is someone told them that they should. They haven’t stopped to consider whether it’s something they actually want.
To Avoid Infringing Someone Else’s Patent
“I want to patent it, so I know I can make it” is another reason I commonly hear from inventors. Unfortunately, this reasoning stems from a major misconception! In fact, patenting an invention is no guarantee that it won’t infringe other patents.
This is a very important concept, so let’s talk about it right now! Having a patent does not give you the right to make a product. It gives you the right to stop others from making, using, or selling the product. There is an important difference here. In granting you a patent on your improvements, the United States Patent and Trademark Office (USPTO, aka “the Patent Office”) does not consider whether you could actually produce your product without infringing any other patent. Thus, getting a patent is no guarantee that you are not infringing the patents of others!
It pays to consider why you are applying for a patent. Knowing your reasons will help you to decide whether applying for a patent is the right decision and will shape your strategy throughout the process.