3 easy tips to help make patents less scary for tech businesses.
Are patents a minefield for SME tech businesses? The short answer is yes. But there are things that can make it less daunting, and the 3 tips discussed below are easy to implement and will help a lot.
Patents and the process of obtaining them are complex. There are lots of decisions to take and various options to decide between, which can easily overwhelm someone that is either not experienced or simply too busy running a business to focus on it. On top of that, if decisions are made for the wrong reasons or without the correct business information, there are many things that can go wrong and leave you high and dry.
The main risks for smaller or medium sized tech businesses include the obvious ones of not adequately protecting your valuable innovations, not being able to demonstrate that protection to investors and leaving yourselves open to attack from competitor patents. But there is also the spectre of spiralling costs – decisions taken today will come back to haunt your CFO tomorrow as costs in each patent application you file are loaded toward the rear of the process. In the past I’ve seen businesses make decisions to patent inventions and then a few years later struggle with the financial burden as the costs rise.
The chart below shows the financial issue and you can see that the first 2 years of a patent application might only cost you roughly £10k, but there is a spike in costs around year 3 and then, in years 4-6 the costs are likely to be significantly higher. This is compounded if there are multiple patent applications on the go at the same time.
So, what can SME tech businesses do to avoid stepping on a landmine or seeing more spend than they envisaged without any return on investment?
I’ve listed what I think are the main ones below.
1. Get an advisor that can guide you commercially, not just legally
There are lots of patent attorneys out there and most of them are pretty good, to be honest. The route to qualification as a patent attorney is pretty rigorous and anyone who has been through that is likely to have a good handle on legal patent issues.
But you need more. You need someone who understands business at the SME level and is able to help you use your patents as a commercial tool. This skill is harder to find, but look for an individual that has the skills and experience you need – don’t just think that a big firm or brand name is going to tick all the boxes as that often leads to a bad fit.
Find someone who specialises in helping smaller and medium sized technology businesses and understands the budgetary and commercial environment you’re operating in. When you finally decide to approach a patent attorney, ask them questions that show they have these skills.
2. Set a budget
This is the simplest thing to explain, but is the thing that, in my experience, is most rarely implemented.
I understand that smaller tech businesses, and in particular startups, are moving so quickly that the process of budgeting can be more, shall we say, fluid. But setting an IP budget does not need to be an onerous task. You simply need to pick an amount that you’re happy to invest in the process, given the benefits it will bring (if you get the right person in tip 1 then they will help here).
Once you have the amount you have decided to spend, then decide what you will do with it. This will make sure that you spend the money you have in the areas that will give you the greatest return. If you spend in an ad hoc way then the risk of getting poor ROI increases.
3. Be commercial about what you protect
Easy to say, but what does it mean?
All patent attorneys and legal professionals talk about ‘commercial advice’ but in my experience few actually understand what that means for a tech SME. Here’s one way that you can be more commercial around your IP and it’s super easy…
Protect what is of most value to your business.
The question of value is subjective and it will be different for different businesses. For an early stage startup, it might be to protect the tech and the features that a competitor is most likely to copy. For a more established SME, it might be to protect the greatest revenue stream or maximise the use of the patent box tax relief scheme. Let’s flesh out a couple of examples.
Example for a startup
A startup might just have been spun out from a university. They have some innovative tech and a potential application, but they don’t yet have any confirmation of who their customers might be, definitely have no sales and are in an environment where the business and the business model might change very rapidly.
In cases like this, it probably makes sense to protect the innovative tech on its own. If there is a product or system, they might write out a description of how it operates and then identify the ‘cleverest’ bits of what they do and/or what they would be unhappy if a competitor were to copy.
Example for a more established SME
A business like this might have a better understanding of their market and where the sales are, or will be. For example, the business might split its revenue by product line to understand it’s most commercially valuable products.
Once this is understood then a conversation with your chose attorney (see tip 1) will establish whether that revenue can be protected using patents. It might be possible to protect the product as it is, or to protect improvements. This might also allow use of the patent box to reduce the business’s corporation tax bill.
Those are just examples and there will be many other examples and different flavours of the ones mentioned above.
For SME tech businesses, these 3 tips are a game changer and greatly increase the chances of a successful foray into the world of patents. If you’d like to chat about any of it further then feel free to email me on sblake@matter-ip.com. There’s no charge for that type of thing and, whether we end up working together or not, I guarantee that the call will be valuable.
Steve Blake
