Patent Cost: Will a patent help you make money?

Will you get a return on investment for your patent cost? Three factors to consider before paying patent costs: First to Market, Complexity and Exclusivity.

Factor 1: By avoiding patent costs, can you enhance your First to Market advantage?

When your invention budget is limited, you can opt to invest the maximum money in marketing and forego patent protection. Eventually, the marketplace will copy your success. While your invention and success is unknown, copying is less likely. Since your competitors will waste time discovering your invention’s success and waste time copying your invention, your invention will enjoy a limited time when it is unique in the marketplace. A carefully crafted marketing program can leverage this advantage both before and after your competition enters the marketplace.

Just after bringing your invention to the marketplace, your invention will enjoy exclusivity—it is truly new. After your competition enters the market, you can spin clever marketing campaigns that teach your consumer “about the original,” or “not to be confused by imitators.” These marketing strategies are well known and easy to apply. They can be effective at beating competition in the marketplace, rather than in court. Money spent on marketing promotes your product and hurts your competition. Money spent in court fighting over a patent favors the company with deeper pockets. Don’t underestimate this strategy, especially if you are a startup business.

Another effective strategy is to innovate faster than your competition can copy. This avoids legal expense in favor of research expense.

Factor 2: Is the invention complex or difficult to reverse engineer? Can you keep the invention secret and avoid paying the cost of a patent?

Is your technology unusually complex? Can you hide your invention from the public? If so, then patent protection may not be the only protection. You may be able to protect your invention by leveraging trade secret laws. Your attorney can help you develop a plan to keep your information confidential in such a way that you can latter, if necessary, prove your trade secrets in a court of law.

Patent protection can last about 20 years after filing the patent application. Trade secret protection can last as long as the secret remains secret. How long the secret can last will depend on, for example:

  • How difficult is your invention to reverse engineer?
  • Can your invention be disassembled and studied?
  • How quickly can the marketplace copy your invention?
  • How long will your competitor spend setting up manufacturing and/or distribution systems?
  • How much must each employee know about the secret portions of your invention?
  • Is there a viable business model that distributes the useful benefit of your invention to the public while keeping your invention hidden?

Eventually, you will need to choose between trade secret protection and patent protection.

In exchange for the patent rights, your patent pending must eventually publish, revealing any secrets. The choice between trade secret protection or patent protection does not need to be made prior to marketing the invention. Because the patent process is secret, and because the patent process is slow, you can can enjoy the benefits of patent protection and trade secret protection for considerable time, between 18 months and 4+ years. Before the patent becomes public, you can make a business decision. Either, you can secure patent protection for the remainder of the patent term, or you can continue to maintain your trade secret for a potentially longer time.

Coke’s not-so-secret formula

Perhaps you have heard about the 107+ year old secret formula for coca-cola. Isn’t odd that there is a best-known trade secret. This is because Coke, as part of a marketing strategy, presents the formulas a closely-held trade secret. There are numerous rumors about the coca-cola formula. For example, the ingredient “7X” has been touted as an integral component of the formula. Or, two executives know only half the formula. Another rumor, Coca-Cola employees mix the drink by numbers assigned to ingredients, rather than by name, to help avoid reverse engineering the formula. Modern analytical methods of food scientists can identify Coke’s composition. The first, original formula was likely found many years ago and published on the Internet. Coke drinkers can feel that they are having something special because there is a secret formula. That is clever marketing. Marketing ideas like this belong with Factor 1, above.

Factor 3: Are the future, exclusive patent rights more valuable than the patent cost?

You can estimate the potential strength of a patent in three steps.

  1. Patents can prevent competitors from acting.
  2. What are the differences between your invention and all prior inventions?
  3. How will preventing your competition from acting upon these differences effect their ability to compete?

Earlier, we explained that patent holder has the right to exclude others from making, using, offering for sale, or selling the invention. Now, take that knowledge and apply it to your invention. You need to answer the question “What effect can this patent have on the competitive marketplace?” To do this, you may want a prior art search.