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Shutting out the competition: How patents can help, and how to get one for less

There are no end of stories in the news about small businesses shunning patents. The reasons given are often the significant cost, time, and effort required to even try and obtain a patent, never mind the risk that no patent ever results.

I have heard about businesses spending hundreds of thousands of dollars on international patent fees, while their competitors manage to leapfrog the technology being patented, gaining an advantage in the marketplace, and rendering the patent filings largely meaningless. I have also heard of business owners wishing they had not bothered to pursue a patent, given the cost, and regretting that they had not simply spent the time and money on their business.

However, these types of doom-and-gloom stories tend to focus on the downside of small businesses and patents. The other side is that the inventor gets an opportunity to receive, in exchange for public disclosure, a 20-year monopoly on making, using, selling, and importing an invention. Such a monopoly can be invaluable in today’s marketplace.

Patents do have a practical place and purpose, even for small business, and even when considering the cost. They give their owners a 20-year right to exclude others businesses from making, selling, using, and importing the invention. They legitimize research, serve as tangible proof that work was done, bolster reputation, and prevent other people from later obtaining a patent over the invention.

Inventors can also license or sell their patents, and collateralize them (borrow money against them). In addition, patents bolster asset sheets, so that companies are given higher valuations based on their patent holdings. One can look to the sale of defunct Motorola for an example of this; Google bought Motorola Mobility for $40 per share, largely because of the perceived value of its patent portfolio.

The patent system may be flawed in certain ways. Consider the case of patent trolls, who tend to be non-operating entities that mail out thousands of cease-and-desist letters to ordinary businesses, demanding extravagant licensing fees for use of their patents and knowing that the businesses have no money to defend themselves in court against a patent infringement lawsuit. But to ignore patents is to ignore a great possibility. It is the only system our society has for coaxing inventions into the public domain, and rewarding inventors.

Patents are expensive, but that is largely a function of the expertise, experience, and time they take to prepare. However, there are ways that a business owner can help their professional advisor prepare the groundwork to a patent, which helps lower costs. Here are some suggestions.

First, prospective patentees should carefully record in a diary or laboratory notebook their inventions, and how they were created. An inventor should record details of when, where, and how the invention was created. What problem does the invention solve, and how does it solve the problem? How does the invention differ from what is already in the marketplace, or from leading research in the field?

The prospective patentee should include a record of who was involved in coming up with the invention, and in what capacity. That is to say, were those people employees or contractors at the time? Was the work done for the government?
Every patent must contain a detailed description of how the invention claimed in the patent application can be manufactured, how it works, and how one uses it. This allows a prospective patentee to stay ahead of the game by preparing such information in advance, before talking to his or her professional advisor. Also, are there special ways of manufacturing the invention? Are parts available off the shelf, or must they be particularly manufactured? If the latter, the manufacturing process must be described. Are there variations in terms of how the invention can be built? If so, describe each and every variation in as much detail as possible. Finally, are there other ways of using the invention?

All these things must be described in detail. The prudent inventor should assemble this information, preferably in electronic form, and send it to their advisor. Most, if not all, of this information will be included in the patent application. The patent agent can then use this initial write-up as a basis for the draft patent application, reverting to the inventor(s) where necessary to gather more details or gain a better understanding of the invention and how it works. Having the initial write-up done before talking to the patent agent will save the agent time and money in the long run.

Then, with their advisor’s help, the inventor needs to select where in the world they require protection, and also, where they want it. Inventors can do their market research in advance, and determine in which countries they need patent protection in order to best advance their business goals. With a budget in mind, and a list of countries in which patent protection is desired, an inventor and the advisor can then together determine the best way to achieve the best level of protection that is realistically affordable to the inventor.
An inventor who comes to their professional advisor with the above information ends up with a stronger patent, provides great assistance to the patent agent, and likely saves thousands of dollars in the process. In a small business where every dollar counts, thousands of dollars can sometimes mean the difference between bankruptcy and success.

Jonathan Mesiano-Crookston is a lawyer and patent and trade-mark agent with Goldman Hine LLP in Toronto. He specializes in dispute resolution, franchising, technology, and intellectual property.

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