To patent or not to patent

Legally protecting your intellectual property by taking out patents on your new product, service or design is a bit like managing teenage children, says Greg Mirams, a Dunedin-based agritech-entrepreneur and founder of animal parasite diagnostics company Techion Group. “You hope that one day they will turn into something valuable for you in later life; they quite merrily take a lot of money, promise lots, but often they don’t deliver.”

Patents are often the first thing many investors want to see, especially when in negotiations with a young life science company, but often they are not worth the time or the large amount of money they cost to write, says Mirams. “We work in a field where we and any other [early stage life science companies in New Zealand] could be vaporised by the big drug companies if they truly decided to take us out on our patents.”

Most companies in New Zealand simply don’t have the resources to protect the patents they take out, he says. Couple that with the fact that the patents Mirams first took out to protect his novel parasitic diagnostic technology bear little resemblance to the product Mirams is now successfully marketing and his arguments gain even more traction.
“IP is just one part of a business. But often the first thing angel (early stage) investors lurch to is ‘can you get a patent on it?’ before they’ve even walked through the commercial applications and what the actual business looks like.”

Patents are expensive to investigate, expensive to secure, expensive to maintain and very expensive to defend, says Mirams, yet the vast majority aren’t worth the paper they are written on as only a tiny proportion ever go on to protect something that’s actually commercialised. “[Legally protecting IP] can suck the life blood out of small startup companies, yet a patent is worth nothing if you can’t get the goddamn thing to market.”

According to the US Patent and Trademark Office (USPTO) only about one in 500 patented inventions commercially succeed and thus return the cost of patenting, says Kristian Slack, an engineer and scientist (not a lawyer, he stresses) who heads up InnovIQ, a Kiwi consultancy that helps investors and entrepreneurs discover just how novel and commercially viable their new product might be in a heavily patented world. That’s not to say patenting is a bad thing, it’s just there are other avenues entrepreneurs and investors alike should explore first to protect their company and assess its worth, say both Mirams and Slack.

Many products aren’t patentable as they are not novel or have anything novel about them – the core requirement to securing a patent. Or they are so quick to market or have a such a short shelf-life before they are gazumped by something better, like many apps for example, that it’s simply not worth patenting them, as the time it takes to patent them (up to four years) will be longer than their lifespan.

Often you can protect your product by just being nimble and staying ahead of your competition, says Mirams. “We’re so fast we’re developing and building on our technology and building new partnerships all the time. That’s how we protect our business.”

Debra Kaye, a partner with US innovation consultancy Lucule, says in one of her regular advice columns that in today’s world of 3D design and printing, affordable manufacture and e-commerce it’s often far better to spend your money on creating and building a recognisable brand and message than on patents. “These are things that can’t be patented and can’t easily be copied.”

Check out the landscape
Mirams and Slack both agree at the very minimum it’s important for investors and inventors to explore the patent “landscape” as part of their basic market research, to see if the company they are building could infringe on anyone else’s patent (and thus discover if their new ‘whatsit’ has an unfettered commercial future) and to learn what else is out there. Also, what similar things failed or succeeded? It all helps them to learn how to improve what they are doing and possibly discover other opportunities for their budding company.

It’s also important for investors and entrepreneurs to check out the patent landscape to avoid reinventing the wheel, says Slack, or putting too much value against things such as the amount a company spends on R&D or the number of patents it has, as none of that has anything to do with how likely a company is to succeed.

The World Intellectual Property Organisation (WIPO) estimates about 30 percent of the research carried out in Europe is done on areas that have already been investigated, while the European Patent Office (EPO) says 20 billion Euros a year is wasted on duplicate research.

Jo Shaw, a senior associate with one of New Zealand’s leading IP law firms, AJ Park, says patent work is actually a very small part of the work of IP lawyers. “IP is a very complex area with a lot of misunderstanding. Thinking about what IP protection you have is important, but know-how is also really important; all those little things an entrepreneur knows or their employees know that can give the business a competitive advantage. That’s not patentable and you can’t get a trademark on it, but you should be asking if you’re protecting the knowledge of your staff, ensuring they know all about confidentiality. That’s all really, really important, and that’s all IP too.”

Often entrepreneurs come in because they’ve been told they need a patent, says Shaw, but often they don’t. “The first thing we do is shut up and listen. We let them tell us what their invention is, what their plans are, and what they want to do and we will then take a look at their business and think about how they might get there. Now patent protection might be a part of that or not; so we might just give them an idea of what their next steps might be and suggest they come back when they’ve reached the next stage.”

A good patent attorney will always be happy to talk to a company about their IP position and there shouldn’t be any charges without them being agreed to first, she says.
“You should never be surprised by costs. If you are, then your patent attorney is not a good one.”

Mirams advises entrepreneurs to target angel investors who understand IP and what’s required and can advise their investee companies without incurring any legal costs. You should also shop around for the right lawyer or just contact another entrepreneur in a similar field and ask them about their experiences, he says.

“You have to think very carefully about when you do this stuff and where you do it, because it can become like that out-of-control teenager; once you push the button, you don’t always have control of it and you don’t know how much it will cost you in the end.”

Lesley Springall in an Auckland-based freelance business journalist. www.linkedin.com/in/lesleyspringall