Patents: what start-ups need to know

If you are involved in founding or growing a tech start-up, there are certain things which you should know about patents. In this article, we set out in 16 points the absolute minimum that you need to know, with some links to more in-depth discussions.

1. Patents relate to technical innovations

To be patentable, an innovation must be novel and inventive and must solve some technical problem. Solutions to abstract problems or business problems without technical content, are not patentable, at least in Europe. If what you want to protect is some branding, you need to look at registered trade marks instead. If you want to protect the appearance of an object or user interface, you should consider registered designs. These are separate topics.

2. You must keep ideas confidential before filing a patent application...

To obtain a valid patent, your idea must be novel (and inventive) when you first file a patent application. It isn't novel if it has been disclosed to anyone else who is not under an obligation of confidence, and you need to be very careful about this. It may even be disclosed if someone can prove that the public could have seen the invention and how it works, even if they did not. In the UK and before the European Patent Office, you must not have made a non-confidential disclosure before you first file a suitable patent application. That being said, it is sometimes possible to make disclosures in confidence.

3. ...although there are limited exceptions

If you have recently disclosed an innovation without first filing a patent application, it might still be possible to obtain protection in a limited number of countries which have grace periods. For example the United States, Canada and Australia have one year grace periods meaning that disclosures by the inventor(s) in the year before a patent application is filed will typically be disregarded. Do take advice urgently if this may apply to you as the law is quite involved, and it is often advisable to file as quickly as possible anyway. Although the UK has no as-of-right grace period for patents, it is often possible to obtain registered design protection, filing up to a year after first disclosure.

4. Many computer-implemented innovations are patentable

It is well known that UK and European patent law states that computer programs as such are not patentable, but this limitation is narrower than it may sound. Generally speaking, if a computer-implemented invention solves a technical problem, for example if it controls a device or analyses physical data, then it should be patentable, provided that it also fulfils the usual requirements of being novel and inventive. Many software start-ups are really trying to solve business, rather than technical, problems but software and other companies who are making technical innovations should check whether patents may be relevant to their industry. Here is a more detailed article on the patentability of computer software.

5. Patents are property rights arising from invention

Patents are intellectual property rights. They can be bought and sold, licensed, even mortgaged, like other property rights. Start-ups need to have, and be able to prove that they have, clear ownership of their IP rights. To work out the owner of the right to be granted a patent, first identify the inventor or inventors. This is the person or people who actually devised the invention and no one else. Then ascertain whether any of the inventors have relevant contracts of employment or other agreements which transfer rights to others. This indicates which party or parties are entitled to be granted a patent. If this is not completely clear, it is usually best to take advice and deal with any problems sooner rather than later.

6. Patents are obtained through an application process

Patents are examined to determine whether they are novel and inventive and meet other requirements. This means that if you come across a patent document which is relevant to your work, perhaps because a competitor describes a product as patented or patent-pending, or if you browse patent databases, you need to first be sure whether you are looking at a patent application or an actual granted patent. We have often come across people making wrong business decisions because they confuse the two. You can write anything you like in a patent application, and it will be published, but whether it will be granted is a different matter. If you are reading a granted patent which may be relevant to you, then you should check whether its renewal fees have been paid.

The patent application process usually takes quite a number of years. Four to seven years would be typical. There are options to speed it up or slow it down. Obtaining a patent quickly can be commercially valuable in some circumstances but brings forward costs. Sometimes applicants try to keep patent applications pending for a long time to give them more options if an infringer comes along or to defer costs (or to put off the day when an application is finally refused...)

7. Patent applications are published after 18 months

In most circumstances, patent applications are initially kept confidential by Intellectual Property Offices and then published on the internet 18 months after their filing date, presuming they are still pending. Publication of your application puts some of your information into the public domain. It becomes prior art for future patent applications which can be useful for defensive purposes (or a problem if it affects another later application of your own). You can't miss out a key enabling part of the invention you are trying to protect and expect to obtain valid patent protection. However, it is possible to receive a search report and get a good idea of what breadth of protection you are going to obtain, in time to withdraw your application and prevent its publication if you don't think the scope of protection justifies the disclosure.

8. Patents are time-limited

Patents, once granted, have a maximum duration. In many countries, this maximum term is 20 years from their filing date. In most countries, renewal fees must be paid periodically to maintain patents or they will lapse before the end of their potential term.

9. Patents are territorial

Patents cover specific territories; for example, a UK patent, which is examined by the UK Intellectual Property Office, covers the UK; a European patent, which is examined by the European Patent Office, can cover more than 38 European territories (depending on validation decisions made on grant); a Japanese patent, which is examined by the Japanese Patent Office, covers Japan, and so forth.

In terms of getting your own patent, you can usually file a patent application in a single country to begin with and then file internationally (with a 'priority claim') at any point in the next 12 months. Please see our articles on the UK patent application procedure and the European patent application procedure and the options for seeking patent protection internationally.

Other people's patents can only affect your freedom to operate in the countries where they are or may be granted, but anything published in a patent, or any other document, anywhere at any time in the past, can affect your ability to obtain a patent.

10. Patents have claims which set out the scope of protection

Patents and patent applications are usually quite long documents with detailed technical descriptions. The actual scope of protection afforded by a patent is defined by the claims, which are usually at the end. If you are reading patents to see whether your own ideas are new and inventive you need to review the entire documents. If you are reading patents to investigate freedom to operate, you need to consider the claims. We are frequently asked why someone appears to have patented something which is already known, surely this is wrong? Usually, even if almost everything disclosed in the patent is known, there is a key novel feature in the claims.

11. Having a patent does not give you freedom-to-operate

You can obtain a patent for a product or process which is new and inventive. However an idea can be new and inventive and still fall within the scope of someone else's earlier patent, or there may be other patents which are relevant to your business. If you want to assess the chance of obtaining a patent you need a patentability search. If you want to assess freedom-to-operate, you need a freedom-to-operate search. These are very different to one another.

12. Patents are expensive to obtain...

...but most of the cost of obtaining a patent is deferred until several years after a patent application was first filed. Start-ups usually only need to check they have sufficient funding for the first part of the application process; they hope to have received substantial investment or sold product before the costs of arguing for grant with various Patent Offices, or renewal fees, become due. The cost of a patent seems high if you are setting up a company with your own credit card but is much less significant when compared to the entire cost of getting a product ready for market and then launching it. In many industries, the cost of obtaining patents is one which your competitors will also face.

13. Patents get you money...

...by getting you investment. That is their main short-term benefit to start-up companies. You are unlikely to find yourself trying to enforce a patent in the early stages of a start-up (for one thing, patents usually take several years to be granted), or ever (litigation is thankfully fairly rare), but you will be trying to build a business which has IP which is defensible if need be. Your future business, or a big company to whom you one day exit, might enforce the patent many years from now. Patents frequently keep competitors out of markets without ever being litigated. Your patent might feature in someone else's due diligence. But in the early stages of a business, patent applications are all about building a story and a future position which can be presented to investors.

14. You don't need to have actually built a prototype

A valid patent must sufficiently disclose how to carry out the invention. For many inventions, it is possible to write a suitable disclosure without having actually built a prototype. That being said, in some fields, particularly medicines, it can be difficult to obtain a patent without experimental evidence at the date of filing.

15. Patents are a great source of technical information

Do you want to find out how your competitors make their products? Are you trying to solve a technical problem which you expect that others will have solved already in different industries? Patent publications are a great source of technical information - and only a fraction are actually granted and in force. Start-ups really should use them as a source of technical ideas. Few do!

16. Patents, like businesses, vary a lot

Some patents are broad; some patents are narrow; some patents are clearly valid; some are invalid; some might be broad and valid but it is hard to be sure; some are valuable; some are worthless; some are valuable briefly at one stage in a business; some patents are the only value left in a business that doesn't make it in the marketplace. Some patents get enforced through the Courts, most do not; some patents (many in fact) successfully deter competitors, others do not; some patents generate licence revenue, most do not; for some businesses, patents are irrelevant; for some businesses, patents are essential; for some businesses, patents just might be handy later.

You shouldn't make decisions about patents based on anecdotes from someone else's experience because business situations are never the same twice. Think about how they might be relevant to your particular circumstances!

Conclusion

There is a lot more to know about patents than is set out above, but these are the basics. If you have any questions, please contact us or write directly to one of our patent attorneys. Links to some other topics discussed on our website are set out below.

Author: Alistair Hindle.