Intellectual property basics for startups: patents

By: Victoria Lee

The crown jewel of a typical technology company is its intellectual property portfolio. Having a good basic understanding of intellectual property protection is essential for entrepreneurs to extract value out of their company's key assets and manage opportunities and risk arising from them. One important type of intellectual property that may be part of an intellectual property portfolio is a patent.

What is a patent?

Utility patents are the types of patents that are typically filed by technology-oriented startups.1 They protect inventions which are new, useful and non-obvious. Such inventions can be electrical, biological, mechanical, chemical or even a business process. In order to obtain any patent rights, the startup must apply to the government in each jurisdiction in which protection is sought and comply with such jurisdiction's legal criteria. Currently, a patent in the United States has a term of 20 years from the filing date but the term may be extended under certain conditions.

When do you need a patent?

Most products and services can be protected by a combination of intellectual property rights. For example, computer software can be protected by patents, copyrights, trademarks and trade secrets. Microsoft protects certain functions of its Windows software with patents; it uses copyright to protect the actual code of the Windows software from copying; it uses trademark law to protect the ''Microsoft'' and ''Windows'' trademarks which identify the product; and it uses trade secret law to protect the structure and methodology of its source code. However, once a patent is issued, trade secrets in the part of the computer software protected by the patent will be disclosed and will no longer be protected by trade secret law.

Patents permit the owner to ''exclude'' others from making, using, selling, offering for sale, and importing a product or service embodying the invention. The fact that a patent is a ''negative'' right is very important because it means that obtaining a patent does not give a startup the right to sell a product or provide a service: many products and services are covered by the claims of multiple patents owned by different parties.  Patents are generally viewed as the strongest form of intellectual property because they can prevent a competitor most effectively from making its product.

Many startups miss the opportunity to protect the most important elements of their products by not understanding the deadlines in patent law or not implementing a strategy for patent protection of products and services. Briefly, most countries will not permit patent protection for an invention unless the application is filed prior to public disclosure of the invention, such as by demonstrating a product at a trade show, publishing technical papers or offering it openly for sale to third parties. The United States, like the rest of the world, now follows the ''first to file'' rule with certain modifications rather than the previous ''first to invent'' rule. Startups need to be aware of this framework and ensure that they make appropriate decisions regarding protection before demonstrating their products at a tradeshow, publishing technical papers about it or offering it for sale to third parties.

Patents are sufficiently important that we have included a separate overview specifically discussing patent strategies for startups, including a discussion about the deadlines for patent prosecution. You can access our patent strategy overview.