Startup entrepreneurs: forget what you think you know about patenting, you’re doing it all wrong. Of course, you can’t be blamed for this, there is a huge cadre of experts—be they attorneys, investors or your advisory board—who tell you that you need patents to “protect your product.” For these folks, patent protection serves as a box for a startup to check after the fact as in “Do you have patents? Check.” Rarely do these experts understand that the issue is not whether the startup has obtained a patent, but whether and to what extent that patent protection will benefit the startup over the long run. In other words, these experts typically treat patent protection merely as a tactic to be executed, not as a business strategy that first must be developed and aligned with short and long term interests of the startup.
Why is it a problem that patents are not considered from a strategic framework? We can look at the past to demonstrate this point. While patent protection serves as a default activity for many product and technology companies that seek to capture the value of their new business ideas, it can be contended that fewer than 5% of patents obtained by the most sophisticated patent filing companies are sufficient to effectively eliminate competition in the same market, or as I called them “market defining.” It follows that if it is so hard for these sophisticated companies to get it right, it must be much more difficult for startups to succeed in developing market-defining patent protection. This means that while the startup may have developed and validated a new market by providing customers with a sought-after innovation, their patents are insufficient to prevent competitors from providing a competing product solution to the same customer. As such, even though the startup did the hard work of creating the market, other companies are nonetheless able to leverage this effort and investment to provide a competing product that does not infringe the innovator’s patent rights.
Getting back to the tactics vs. strategy discussion, patents are typically generated from the framework of the product or technology that the startup seeks to bring to market. However, customers do not care how you solve their problem, they care that their problem was solved in a way that they find to be a compelling value proposition. It then follows that in order to reap the full value available from this customer, your patent protection strategy must fully encompass the customer solution, as opposed to the product or technology that you are providing to the consumer. In other words, your patents must do more than protect your product or technology features. Instead, your patenting strategy must align as much as possible with the benefits that your product or technology provides to your customers.
In short, the key metric in whether patents will create long-term value for your startup is whether you can protect the value you provide to the customer, as opposed to obtaining patents that cover only one way to solve the same customer problem. If you can achieve such protection, your patents will be strategically aligned with your business and exit goals. I will talk more about the features vs. benefits strategy of patenting in later posts, but for those who want to read ahead, check out this post on my IP Asset Maximizer Blog where I have been ruminating on IP Strategy topics since 2008 or contact me at jhutter@leanlegalteam.com.
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