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May 23, 2017

Why patents are so important for start-up tech companies

Patents are incredibly important in safeguarding the future of a tech business.

By James Nunns

The first thing any creator should do once they’ve developed a new product or concept is to get it patented. It’s especially important for start-ups and inventors that are just starting out.

It might seem like a bold move. After all, the company and the product are unknown. Why bother with going through the hassle of a patent at such an early stage in development?

There are very good reasons, and I know this first-hand.


My patent story

My own story shows why patents are a vital first step for new tech companies.

John Safa, founder and CTO of Pushfor.

When I launched my first tech start-up in early 2000, I was keen to show major tech companies how my product – a new kind of protection – could help secure their business applications. One of the businesses I pitched to copied my idea.

Fortunately for me (not so much for them) I’d already taken out a patent on the technology. Later, as the business went through an IPO process, it was forced to admit that it had copied my idea. It offered to buy my business as a way to resolve the issue quickly. I chose not to sell.

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Your ideas are at risk without a patent

Several major tech companies have been fined for the unauthorised use of patented technology.

In 2012 both Samsung and Apple were fined for infringing on each other’s patents. In 2014, Apple was fined $23.6m for infringing on six patents belonging to mobile telecoms firm, SkyTel. 2016 saw Apple ordered to pay $302m for breaking patents in its development of iMessage and FaceTime.

Obviously, it’s possible for two people working at different companies to come up with similar ideas without one copying the other. But in such cases, it’s the one who has patented that idea first that has the advantage.

These are big companies, with big legal budgets. Imagine how much easier it is for a company to take advantage of a start-up. A patent protects you.


Your ideas are valuable, so patent them

Let’s be honest, if you don’t think your concept is valuable enough to patent it, why should anyone else be excited by your idea? You are your concept’s biggest advocate. If the idea has value, you won’t be the only one to see it. Patent it. The patent process also checks for prior art so you can be confident that no-one has a similar idea as yours.


A patent makes you more attractive to investors

One of the first things an investor will say to a tech start up is ‘What’s unique about your idea? If it’s so good, what’s to stop Google or Microsoft developing it?’ The answer is ‘a granted patent’. That’s going to give your business much more value in the long term, which is what investors are interested in.


A patent gives your business more value at exit

If you’re looking to exit your business eventually, or create liquidity through another route such as IPO, having a unique, patented technology will give your business more value.


When to apply for a patent

If you have a technology that is unique and new, it could be patentable. A patent can be granted for (according to the patent office) something that can be made or used, is new, and is inventive (not just a simple modification to something that already exists).

They aren’t granted for every idea. The concept being patented needs to be unique or the application will be rejected.


What it costs

Applying for a patent isn’t cheap. In the UK, according to the patent office, it costs around £4,000 to apply, and takes five years. That’s not the end of it – you have to pay to renew it each year, and of course to defend it if someone tries to copy your technology.

But the cost of not applying could be far, far greater.


Selling your patent

There are companies that exist just to hunt down patent infringements. These companies buy patents from tech companies and hold them as part of a holding company. They then search for companies who are infringing those patents, making money from bringing lawsuits against them. If you’re approached by one, be cautious, in case they’re offering you much less than your patent is worth (they often buy patents from companies about to go out of business). They’re known as ‘patent trolls’, and many of the big cases against tech companies are brought by them. This shows the value of a patent – whoever holds it can realise its value, and whatever the circumstances, copying patented technology is against the law.

Patents are incredibly important in safeguarding the future of a tech business. My own experience shows that if you own the patent, you are protecting the true value of your business.

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