A Guide to Patents for Start-ups and Scale-ups

Even for a small company, understanding IP can help protect your brand and innovations from others.

While not every company has the resources to invest heavily in IP, ensuring that your most valuable assets are protected can help secure vital funding.

Here’s a quick overview of patent rights with some top tips for smaller companies and what you need to know before contacting an IP attorney.

What is a patent?

A patent protects the inventive concept behind a product. It may cover a new product, method or process, or a new use for a product. The invention need not be groundbreaking, and many patents cover very narrow technical advances — but it must be new, useful and inventive at the time the patent is filed.

It’s important to keep your invention confidential before applying for a patent. Once approved, a patent provides a monopoly, enabling the owner to prevent others from using the invention for a period of up to 20 years. The patent holder is therefore able to maximise the commercial advantage of the invention by preventing others from using the invention without their permission.

When should I file a patent application? Do I need a working product beforehand?

A patent application requires an invention to be described in such a way that it can be implemented by a person skilled in that field. This does not mean that you need a working product, but rather an idea of how the underlying concept will work and enough detail that a person skilled in your field could put it together based on your disclosure. Often, during the drafting process, your patent attorney will ask questions to draw out more detail if they, in their professional opinion, deem there to be a risk of insufficient disclosure.

There are often multiple steps between filing a patent application and having a working product. It may even be the case that the patent application needs to be  updated to protect developments that have been made before the product gets near to the marketplace.

In most countries, patent rights are awarded on a first to file basis, so filing early is recommended. Since a valid patent must relate to a new concept, if your concept has already appeared in the public domain (for example, a product was sold, advertised for sale on a website or disclosed fully to any third party without an NDA) then you will likely not be able to obtain valid patent rights. A patent should therefore be filed before any public disclosure.

Is it worth the cost and effort it takes to file a patent application?

A patent affords legal protection for the time, effort and money spent developing a new product or process. Without a patent, a new concept is simply gifted to your competition.

As an asset, a patent may be borrowed against, licensed or sold. Some businesses are bought and sold exclusively on the commercial value of their patents.

The most common reasons for pursuing patent protection include:

• The deterrent effect — being notified of the existence of a granted patent can be enough to stop competitors from copying your concept.
• Opening new revenue streams — for example, through licensing royalties.
• A defensive move — to prevent competitors from protecting the same concept.
• To increase market position — through exclusive rights, you’re able to prevent others from commercially using your patented invention, establishing yourself in the market as the pre-eminent player.
• To attract investment, funding and collaboration — a patent portfolio can provide security and reassurance for potential investors or shareholders, as well as demonstrate that the invention in which they are investing is unique.
• For marketing and status — by creating a positive image for a product and demonstrating cutting-edge technology.
• To significantly increase company value — a patent that protects a commercially valuable concept can be worth a significant sum.
• To enhance R&D — having an R&D development policy that includes patents demonstrates a well-organised business approach, enabling strategic decision-making and preventing the ‘gifting’ of R&D efforts to competitors.
• To save costs — the UK Patent Box scheme grants a potentially significant tax reduction on worldwide profits related to a product that is covered by a UK or European patent.

Where should I file a patent application?

While there is no ‘hard and fast’ rule around where you should seek protection, generally you should file a patent application in every territory in which you have a commercial interest.

How much does a UK patent application cost?

Depending on the technology, filing a UK patent application typically costs between 4,000 and 8,000 GBP (+VAT). The lower end of this scale is generally applicable to simple mechanical inventions, the upper end to inventions in more specialised fields. It’s important that an appropriate specialist is tasked with drafting your patent application.

How much do overseas patent applications cost?

Each territory has its own costs and requirements, but typically a single patent specification will suffice for each (though some will require translation into a local language). It’s recommended that you speak with a qualified patent attorney for guidance on the most cost-effective approach.

Can I disclose my idea before I file a patent application?

You can destroy the novelty of your patent application if you disclose your invention before filing. This can prevent it either from being granted or effectively enforced after grant.

Can I disclose my idea if I use nondisclosure agreements?

Non-disclosure agreements can be a useful deterrent, but only if they’re well drafted, which can be expensive. A non-disclosure agreement should specifically define the confidential information surrounding your invention. You may also be able to secure damages if a third party that has entered an agreement with you discloses
information.

Who owns inventions devised by employees?

Any inventions devised by employees in the course of their assigned duties — assuming that invention can be reasonably expected from those employees — are owned by the employer. This is the case even if they are working from home.

Who owns inventions devised by contractors and consultants?

The situation with respect to ownership of inventions devised by contractors and consultants is not as straightforward as for employees. Ownership depends on the agreement you have with the respective contractor or consultant. It’s important to carefully review any agreements you have in place — if you’re unclear about where ownership lies, speak with an IP attorney.

Does my company need an IP policy?

Even companies without a huge budget for protecting IP should consider putting in place an IP policy. This should include some basic guidelines, such as:

• Centralised monitoring and recording of new concepts as they’re generated — for example, by technical sales staff, R&D team members and management. Simply recording the date, inventor name, closest prior art and an outline of the concept is a good starting point.
• Being aware of the patent strength of your competitors — this may involve a regular ‘patent watch’ to understand the size and strength of any patent portfolios that may impose commercial restrictions on your business or carry an infringement concern. Being aware of new patents filed by your competitors gives insight into their R&D initiatives and future direction.
• Employee incentives — if building a patent portfolio is important, consider incentivising employees to invent by offering a limited reward (remuneration) if their idea becomes patented.
• Generational filings — to try and file a patent for all new lines of development starting with a first-generation concept and following with further patent filings for second and third generations, etc.
• IP ownership considerations — to ensure that you have ownership of any IP rights that result from collaborations with suppliers, customers and other third parties. It’s always recommended to have collaboration agreements in place (that include IP ownership clauses) before any work begins.
• Confidentiality considerations — employee contracts should include clauses relating to confidentiality. Policies regarding how confidential information is used around the company should be in place.