Beware of These 5 Costly Patent Mistakes

Starting up? Don’t unwittingly sign away your intellectual property or miss a chance to hit it big. Here are 5 things every entrepreneur needs to know about patents.

Most startup entrepreneurs are first-time entrepreneurs. This means they make their share of beginner’s mistakes, especially in the complex arena of intellectual property (IP) rights and patent filings. Seemingly innocent procedural errors can cause entrepreneurs to lose patent coverage in the U.S. and in international markets.

With recent landmark changes to U.S. patent law, entrepreneurs will have to pay even closer attention to timing and degree of disclosure in order to support claimed inventions.

Roger Wylie, intellectual property law partner with Kilpatrick Townsend & Stockton LLP, and specialist in medical device, sporting goods and software IP, says, “The lives of inventors and patent attorneys will change and become more rushed as the U.S. transitions from a first-to-invent patent system to a first-inventor-to-file system. No longer can inventors take their time to develop and test their inventions before seeking patent protection.”

With increasing need for speed, what mistakes can come back to haunt unsuspecting entrepreneurs? Here are five nasty gotchas:

1. Failure to search prior art. Entrepreneurs invest a lot of time and personal savings in their startup companies and look forward to obtaining patent rights on their most innovative ideas. But sometimes the big dream can turn into a nightmare.

“Nothing is worse than telling an entrepreneur that a technology that took thousands of hours to develop has already been covered by other patent filings. From a commercial perspective, it’s a waste of their talent and efforts,” says Wylie.

To avoid devastating surprises, Wylie encourages entrepreneurs to search “prior art” with skilled legal counsel before actively developing new technologies or product ideas. If conflicts emerge, then entrepreneurs can explore alternative approaches that would not infringe on another company’s intellectual property.

2. Sloppy recordkeeping. Unlike with trademarks, only individuals or a group of individuals can apply for a patent — a business cannot. For an entrepreneur’s company to benefit fully from a patent award, each inventor that is listed on a patent has to “assign” or transfer patent rights to the business entity.

Obviously, it’s cheaper and less contentious for entrepreneurs to obtain written assignments of all prospective intellectual property rights from employees and independent contractors prior to the first day of work rather than after the intellectual property is developed.

3. Missing key deadlines. Entrepreneurs have just one year to file a patent application from the date an invention is publicly disclosed or made available for sale in the U.S. Further, if entrepreneurs file a provisional patent application, they have one year to convert the U.S. provisional patent into a more extensive non-provisional application.

And to the extent that entrepreneurs want to obtain patent rights in international markets, they can make a single patent cooperation treaty (PCT) filing within one year after filing in the U.S. There are PCT jurisdictions in Canada, France, Germany, Japan, South Korea, Mexico and many other countries. Additional filings have to be made to secure patent rights.

4. Being penny-wise but pound-foolish. Entrepreneurs have long used provisional patents as a temporary shortcut for locking down an early filing date with the U.S. Patent and Trademark Office (PTO). The strategy also allows entrepreneurs to claim “patent pending” status for commercial and fundraising purposes.

Wylie warns that entrepreneurs have to be careful that their provisional patent filings are sufficiently detailed in describing their invention and not substantially different from subsequent non-provisional filings. “It’s not uncommon for entrepreneurs who want to save money on legal fees to file a provisional patent on their own and then seek legal counsel to prepare the non-provisional application,” Wylie says. “Legal counsel can’t correct mistakes made on provisional applications.”

5. Overestimating the immediate value of a patent filing. I receive a lot of letters from garage inventors who have a patented technology or product concept and now want to “sell out” to a large corporation. The meaningful value of a patent to business partners and patent aggregators is not the piece of paper from the PTO, but the underlying economic value of the invention.

At some point, entrepreneurs who want to monetize their patents have to present a persuasive case that there is an active, lucrative market for the inventor’s work. Unfortunately, the market value of every better mousetrap doesn’t always exceed the cost of obtaining a patent.

Read my previous article about the patent reform bill for more information on how the America Invents Act impacts startup entrepreneurs and small-business owners.