By: Timothy Lohse and Brent Yamashita
There are three critical junctures during the lifecycle of a technology startup. The first is when the founders seek financing from angel investors or VCs. The second is when the startup launches its first product to the public. The third is when the startup attempts to implement an exit strategy (eg, through an acquisition or IPO). As a founder of a technology start-up, pending and/or issued patents are an important tangible asset that not only provides your company strategic legal and economic advantages but also can help to convince your investors, customers, suppliers, competitors, potential acquirers, underwriters, and even Wall Street itself during these three critical junctures that your technology is cutting-edge and valuable.
All technology startups should develop a patent strategy from the outset. It is advisable to do so even before you have obtained financing because pending patent applications can help you negotiate a higher valuation and possibly obtain more favorable financing terms. Patents can protect your place in the market, and can dissuade and even exclude potential competitors from entering your market. Patents can deter other companies from asserting their own patents against you, or can place you in a better strategic position should there be patent litigation. Finally, patents can be translated into real economic value through licensing, an outright sale of the patents, or assertion in litigation.
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