Why Startups Must Invest In A Strong Patent Strategy

Patents became a sideline topic from the ’80s to the 2010s. Thanks to legal battles and public squabbles between tech giants, it is becoming mainstream again. Thanks to ignorant startups who think “all patents are important”, a lot of sneaky IP lawyers are making ridiculous money by luring startups to pay them for the intellectual property work. 8X Ventures took up this trivial battle recently, did some endless googling and spoke to a lot of crazy folks. Read on to know it all now. 

Before we say more crazy things, let’s understand the basics first. For an invention to be patentable, it should meet four basic criteria: 

• Novelty — it’s new in the world
• Non-obvious — it’s not obvious to someone skilled in the relevant field 
• Usefulness — it has use in the industry or day-to-day life 
• Patentable subject matter — it should not be restricted by law. 

Where Exactly Does The Problem Lie? 

The above criteria do not stop anyone from filing a patent application, even if it is just a minor improvement over the existing solution, as long as it is novel and solves a problem. This might not be a problem today or for everyone, but it could be tomorrow and already is for many. 

An even broader problem is that many companies fail to create valuable patents because they focus too much on technical details instead of broader conceptual protection. Even if a patent is just a slight improvement over core technology, it shall be able to block competitors from offering competing products with their slight technical patented differentiation. Almost two decades old, Amazon’s “one-click ordering” patent is a 19-page patent filing and is mostly made up of flow chart diagrams that show the sequence of events that enable buyers to place an order with a single click and not just the algorithm itself. Many people in technology hate this type of broad patent since they can’t find a turnaround for such a strongly defensible patent. 

According to Esha Arya, Vice-Chairperson at JBM Group and Partner at 8X Ventures, “Companies should adopt a business-driven approach to patenting. It is always good to work with a patent strategist skilled in conceptual protection to identify key patent assets. This way, they can avoid wasting money on patents.” 

Moreover, as per an analyst’s report, more than 95% of patents are worthless. 

The Importance Of Defensible Patents 

A strong patent provides a competitive advantage by preventing others from using or selling the invention, thereby allowing the patent holder to capture market share and generate revenue. Moreover, patents provide startups with a source of revenue through licencing and enable them to attract investors by demonstrating that they have a strong IP portfolio. 

Drawing further on Amazon’s example, estimates suggest that since 1999, the 1-Click patent has generated billions of dollars in revenue for Amazon.com. Even Apple licenced the technology from Amazon and used it on its iTunes Store and iPhoto. 

Another example is Pfizer’s Lipitor patent, which recently expired, minted double-digit billion dollars annually for several years for the company. The patent covered the drug atorvastatin, which is used to lower cholesterol levels. Undoubtedly, it turned out to be highly profitable and helped establish Pfizer as a leader in the pharmaceutical industry. 

“Indian startups should also closely monitor the expected overhaul of India’s patent laws, which was recently announced by the Central Government. These changes may significantly impact future DeepTech patenting, ” says Dedipyaman Shukla, Legal & Policy Consultant. 

Why Should Companies Build A Formidable Patent Strategy? 

A portfolio of patents with one core technology and other minor improvements on this technology, along with use cases, form a formidable protection from competitors. 

Patent portfolio creation strategies can be used to force competitors to licence their technology. For example, a competitor has a core technology patent, and your company fences them in by patenting all potential uses of the patent. To use the core technology, the competitor will have to licence your technology while you can get their core technology. 

8X Ventures reviews 350+ DeepTech startups each month before making investments. In their eagerness to impress investors, startups often pitch their patents as defensible when, in reality, a slight deep dive by 8X Ventures often proves that it is a standalone patent without a clear patent portfolio or strategy. 

According to Govind Kedia, Managing Director of Arctic Invent, “Every field has a few core innovations, and then technology is built on top of this innovation. Patents follow the S-Curve of technology maturation and saturation. Less than 5% of all technology created (patented or otherwise) can be called core innovation. 95% of technology built is either a use case or incremental innovation. 99% of companies would not exist if a business was only focused on core innovation. Besides, universities are in the business of scientific breakthroughs and core technology innovations.” 

Govind further suggests that startups should use patent data to identify opportunities and look at the big picture to see what are possible areas and innovation spaces in the technology space. Visualising data in different domains, such as in these studies: electric vehicle landscape, drone technology, and gaming technology, can help in finding direction. 

What Can DeepTech Startups Do To Improve Their Patent Strategy? 

Here are a few strategies that DeepTech startups can use to defend themselves using patents: 

• There is a need to balance quality vs quantity, and it is ok to have improvement patents along with a few core ones. However, together it should create a portfolio which is monetisable and defensible. Slight improvement patents can serve as a foundation for building a broader IP portfolio. Patents are important in the DeepTech startup journey, but the business model and the road to profitability must be well-defined. 
• Conduct thorough patent searches before filing for a patent. This can help startups identify potential legal challenges.
• Invest in skilled patent attorneys who can ensure your patents are defensible and align with your business strategy.
• Be proactive in patent enforcement and taking legal action against infringers, which means keeping a watch on patents by competitors or new entrants. This can help you protect your innovations and send a clear message to competitors that you are serious about protecting their intellectual property. 
• Conduct timely intellectual property audits. A general-purpose intellectual property audit can help better align the patenting strategy with the overall business strategy of the company. Further, limited-purpose audits can be useful when bracing for patent litigation. 
• Use a bouquet of IP assets such as patents, trademarks, designs, copyrights, and strong legal agreements with IP clauses.

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