IP Budgets: What Protection Level Makes Sense?
An IP budget should not be a burden—it should provide a magnitude of value far above its cost.
Early in my career, an inventor came to my office to talk about patenting his invention. After I advised him about having a patentability search conducted and then explained all that is involved in preparing and prosecuting a patent application, he had one question: “When can I make some money on this?”
I realized that in the days and weeks prior to our meeting, this inventor had more than likely had one or more family members or friends who encouraged him to pursue his invention as if he held a winning lottery ticket and was ready to cash it in. From that day on, I learned to wear two hats for individual inventors: one as a patent attorney giving legal advice on how to protect inventions; and another as a counselor of sorts, gently telling small inventors that getting a patent only costs money and that making money on an invention can involve the same or more effort as working a full-time job.
A small individual inventor can face significant hurdles when trying to make the most of a patented invention. Absent finding a licensee or buyer interested in an invention, challenges involved with manufacturing, marketing, selling, distributing, etc. require time, talent, money, and other resources. It is not impossible to cash in on an invention; however, just getting a patent application filed or even allowed is not like drawing a winning lottery ticket.
Unfortunately, most companies will not even consider unsolicited invention submissions from individuals unless patent protection exists or at least has been applied for. Patent rights grant the patent holder the right to exclude others from “making, using or selling” patented inventions. For a new startup or young company whose business is based on a new technology or invention, patent rights are imperative because such rights can be used to prevent competitors from making, using, or selling competing products or services that infringe patent rights. In addition, patents are intangible assets that can add needed value to a new startup or young company. For such companies, only a limited amount of patents and relatively small IP budget may be required.
Large companies that have established businesses often have research and development departments that are charged with ongoing product development in order to maintain a competitive lead and continually stimulate sales of new products. For businesses that are based on a limited number of products that have relatively long lifespans, a relatively small annual IP budget may be sufficient. For businesses that are involved in rapidly changing technologies or highly competitive products or services, a relatively moderate IP budget may be required.
Trade secret protection can supplement and/or be an alternative to patent protection. Setting up procedures to prevent the dissemination of trade secret information generally does not require a significant budget. Information in the form of a formula, pattern, compilation, program, device, method, technique or process can qualify as a trade secret when it derives independent economic value from not being generally known to, or readily ascertainable by others, and when reasonable efforts are taken to maintain its secrecy.
Examples of trade secrets range from compilations as simple as customer lists to well-known, albeit secret, formulas such as the soft drink formula owned by Coca-Cola and recipes such as the fired chicken recipe owned by Kentucky Fried Chicken. Other examples include methods/techniques/processes for manufacturing consumer products and technological processes, such as computer program processes or scrips.
Whereas patent rights are granted for limited terms (20 years from the earliest non-provisional priority date), trade secret protection can last as long as the secrecy of the information in preserved. Trade secret protection is lost once the information becomes publically known, independently discovered or reverse engineered. Legal steps to protect trade secrets include the use of non-disclosure agreements (NDAs) and work-for-hire and non-compete clauses.
Trademarks are another relatively low-cost form of IP protection, where protection is limited to identifying the source of goods, such as consumer products, or services. Applying for trademark protection can be relatively inexpensive, while establishing recognition of a mark and gaining corresponding goodwill generally requires a marketing budget and plan. Trademark protection can last as long as a trademark is used, unless a trademark becomes generic (i.e., a common term) such as “thermos” for vacuum flasks (genericized in the U.S. in 1963).
Provisional Patent Application
The “patent pending” status of a provisional patent application can be a temporary, low-budget form of IP deterrent that can mature into IP protection. Patent damages can start to accrue from the date that any converted non-provisional application is published to 18 months after its non-provisional filing date.
An IP budget should not be a burden—it should provide a magnitude of value far above its cost. A range of IP protection is available, with categories that can be customized to fit any company’s best needs and goals.
Any views or opinions expressed in this column are those of the author and do not represent those of Ceramic Industry, its staff, Editorial Advisory Board or BNP Media.