Legal Issues
Patent Protection Is Not Always The Best Way To Profit From An Invention
By Steven Pollack
Mar 18, 2006, 20:17

Because so many small business owners, and retailers in particular, are entrepreneurial in spirit they quite often come up with new inventions.  The question then becomes how to best profit from the invention and whether obtaining intellectual property rights will help protect these profits.

Business Strategy

The focus of this analysis is from a business strategy perspective and not a legal perspective.  Any lawyer worth his sheepskin will assure you that it is imperative to protect all your legal rights at all costs.  Most lawyers, however, are not business people and will not be subject to malpractice for giving you bad business advice whereas they can be liable for failing to adequately protect your legal interests.

I made the mistake of spending $17,000 on patent prosecution for a business method patent for designing jewelry over the internet and manufacturing using Rapid Prototyping technology.  My attorney kept hammering me to file a Patent Cooperation Treaty application in addition to my U.S. application in order to protect my global rights.

The problem was that our $150,000 in venture capital had to also go towards technology development and marketing.  I believe I would have been better served spending the $17,000 on marketing rather than the patent application.  In the end, we got the technology to market, never got past the patent office claim rejections, and ran out of capital for marketing before we could gain market acceptance.  So went my participation in the dot com bubble.

Getting a Patent

There are three types of intellectual property rights once can get, depending on the type of thing invented.  For useful articles like a belt, spatula, or chair, a patent is the type of protection you would look for.  For a new concept or marketing campaign where you want to protect the name, then you would want a trademark.  Trademarks are meant to protect the consumer association between the product and the maker.  For books, music, and other fixed expressions a copyright is the appropriate protection.

I will give you my impressions and experience with patent protection and the small inventor.  Patents are very expensive to obtain, between $7,000 and $15,000 depending on how many office actions your patent attorney must respond to.  Office actions tend to be rejections of particular claims and you will lose that protection unless you successfully argue why the patent examiner was wrong in rejecting it.  This can go back and forth several times.  You also may need to amend your application for other reasons.  Finally there are international applications that will cost even more if you want to protect your rights outside the U.S.

Enforcing a Patent

Patents basically give you the right to sue.  They are not self-enforcing so you will need to spend money to stop others from infringing.  It is estimated that patent litigation runs $500,000 per side although litigation rarely gets to a full trial stage. Even so, you will be paying your own costs to litigate because the American judicial system, with a few exceptions, makes each party responsible for their own cost of representation.

A defense to your infringement suit is likely to be that your patent is invalid and should not have been granted in the first place.  This adds to the cost of your litigation and you run the risk of completely losing your patent rights if they win on this issue.

My impression of patents therefore, based on the above analysis, is that it is generally not worth using your limited capital to obtain one.  There are some exceptions and you should evaluate this for yourself or with counsel but I think the best business strategy is coming straight to market and being better than all later competitors.  If you come to market with a patent and someone bigger than you infringes, and does the marketing and distribution better than you, then you are still fighting an uphill battle with shrinking sales and mounting legal costs.

If the infringer is someone small like you then there may be no money to win through litigation.  Of course you could have an easier time in court against someone with limited capital.  My impression though, again as a business and not a legal issue, is that patents are really valuable only for large manufacturers to wield against other market participants.

The exception to this advice is for an invention that can be adequately protected by patent, is not easily designed around, has a large market potential, and for which you will have a hard time bringing to market yourself.

Disclaimer:

This is not legal advice but rather business advice on a legal topic.  I am not an attorney so I am not representing you.  If you need more information on your specific patent needs then you should pay a patent attorney for a consultation.