Chris Baxter shares how to use IP to unlock startup valuation at the pre-traction stage in the first Part of the series Why Investors Always Ask About IP.
As patent attorneys, we are continually surprised by the incorrect perceptions that exist around patent costs, including patent costs in Australia. Here we seek to address:
One of the best examples of a war story on patent costs that we’ve heard was on Shark Tank 2015, during which an inventor claimed to have spent some $700,000 on IP costs prior to any sales of his device. This story goes to the crux of most war stories on patent cost in Australia and overseas, that is – don’t spend money on patents if you are not creating a business (whether a manufacturing or R&D and licensing business) or preparing to sell your patent in parallel to pursuing patent protection. If something significant is not happening on the commercial or capital front within 18 months of filing a provisional patent application this is normally an indicator that there is a misconception around patenting.
The aim of intellectual property is to create far more value than its cost of acquisition, either directly via:
or indirectly by:
than the cost of obtaining that intellectual property.
Where you are founding a startup or preparing to sell your patent, the patent system offers numerous opportunities to delay patent costs, for example:
All up, using the process we have outlined above and in relation to a simple consumer product invention, the total cost for maintaining your claim to the new idea for the first 2 ½ years can be as low as $17k. Baxter IP employs numerous other strategies to maintain costs to a tight budget for our clients who are cost conscious.
You should patent for successful commercial outcomes, whether it is:
So, how might your choice of patent attorney affect the potential for you to achieve a successful commercial outcome?
In relation to 1 & 2, to achieve a valid patent, your best chances are by working with an experienced patent attorney who is a specialist in your technology area as they will understand the prior art more intimately and be able to get right to the heart of any objection an Examiner may raise. No patent attorney is an expert in all technology fields; thus, your best chances of finding a patent attorney with that specialist technical knowledge is within a medium sized patent attorney firm with multiple patent attorneys, rather than a one-person practice.
Tip: There are numerous so-called “patent attorney firms” that are really just one-person- practices. How can you tell? Look at their staff page carefully; simply because they have multiple staff listed does not mean they have more than one patent attorney. Some staff may not be registered patent attorneys. It goes without saying, if the website does not list a registered Australian patent attorney by name – be very careful.
In relation to 3 to 5, it will be easier if you can work with a patent attorney who can add value by introducing you to commercial contacts who can assist you in capital raising / sale of IP and licensing. Further to this, investors and licensees will want to see a reputable patent attorney firm brand behind your intellectual property protection, and it’s even better if they have had positive dealings with the firm previously.
The patent application process is highly deadline oriented, and for some deadlines there are no extensions available – if they are missed, your patent application will lapse. Therefore, the question that every inventor must ask is – what happens if my patent attorney is suddenly unable to look after my matter? For example, if they fall ill. This can be a real problem for a one-person practice, whereas the risk is mitigated by working with a firm with multiple patent attorneys.
Finally, the quality of your patent work is of the utmost importance, and there can be a huge difference between a provisional patent application prepared by one firm and one prepared by another firm in terms of the final scope of legal protection achieved – we explain these differences and why they are important here.
Baxter IP was one of the first patent attorney firms in Australia to adopt a simple fixed-fee and capped-fee approach to carrying out intellectual property work for its clients. Here’s how we make costs transparent: