A patent could offer protection from poachers, but is it worth it?
By Kurt Leyendecker
Prospective clients routinely ask whether getting a patent makes sense given that she would not likely be able to afford the cost of the lawsuit necessary to enforce the patent and stop an infringer.
The truth is that patent infringement litigation is expensive; attorneys’ fees alone usually exceed $1 million in a case taken through trial. Moreover, even if the patent holder prevails, there is no guarantee he will be able to recover attorney fees. In fact, under the American Rule, attorney fees awards are the exception rather than the rule. The good news is that the award of attorney fees in patent cases have become more common in recent years; nevertheless, it is still somewhat foolish for a litigant to assume she will be able to recover fees.
So why bother filing for a patent on an innovation?
First, patent protection levels the playing field a bit. Sure, the large multinational competitor might still command the higher ground, but the slope won’t be as steep. The competitors may have the money, the lines of distribution, the manufacturing experience and brand recognition but only you have the legal right to manufacture your patented article or practice your patented process.
Big companies with a public presence generally don’t like to knowingly infringe another’s patent: it could garner negative press and it could subject them to a lawsuit without a certain outcome (big companies hate uncertainty). Besides, it is usually behooves a large competitor to cut a deal with you.
A patent or at least the filing for one might prevent you from getting proverbially locked out of capitalizing on your innovative product or service. In 2013, the United States became a first-to-file country wherein the first to file for a patent on an invention wins over any second comers even if the later filer invented before the first filer.
Independent inventors and small companies with limited development budgets can take longer to develop a new product compared to a big company with a large R&D budget. If the big company beats you to the patent office before you’ve introduced your product to the public, you lose and they win. Your best bet is to file an application early, usually a less expensive provisional application, to stake your place at front of the line.
A patent gives you leverage. If your product or service takes off, you may not have the resources or cash flow to expand as rapidly as the market demands. Having the exclusive right to make, use or sell the patented property, gives you leverage in enticing investors to fund your expansion.
Without the patent, investors might start a well-funded competing venture without you, or perhaps more likely, they will just decline to become involved realizing that there is nothing stopping a big company in the space from entering the market and driving their company under. With the exclusivity offered by a patent, investors are often more willing to take the risk realizing that infringement by the big company could mean a big payday at the end of an infringement suit if it becomes necessary.
Back to big companies hating uncertainty. They would much prefer to enter a market with a new product that is protected so that they can prevent competition from the other large players and thereby command a higher price and greater profit for the product.
Simply put, a big company noticing your success would rather cut a deal with you for exclusive rights under your patent and pay you 5 to 10 cents on the dollar so that they can charge 10-20 cents more in the marketplace. Without a patent, the value of acquiring your company is severely reduced given the risk that another large competitor could not be stopped from competing.
In the end, it is simple: With a patent protecting your innovative product or service, you have a better chance at capitalizing on your invention. Without a patent, there is nothing stopping well-heeled investors or competitors from moving in, copying your innovation and profiting from your intellectual prowess.
Is the patent worth it, then? Ultimately, this depends on your innovation and its potential value in the marketplace.