Do I Need A Patent
For My Startup?
As a former technology startup co-founder
myself, one of the early questions I asked (repeatedly) was if I needed a
patent. Having since sold my company and
gone to law school, I can say definitively that pursuing a patent as a startup
would not have been the best course for my venture. Patents can be a great way to protect
your innovations, but for early stage ventures, they may not always be the
best strategy.
If you are bootstrapping your startup with limited capital,
then there’s a good chance that a patent will be more of a financial drain than
a revenue channel in the beginning. What
many entrepreneurs overlook is that there are many diverse channels of
protecting your creative capital such as trademarks, tradedress, copyright, trade
secret, and many more… the cheapest and
sometimes the most effective protection an early stage company can get may come
through trade secret protections.
What
is a trade secret? Here’s how WIPO (The
World Intellectual Property Organization) describes it: “Broadly speaking, any
confidential business information which provides an enterprise a competitive
edge may be considered a trade secret. Trade secrets encompass manufacturing or
industrial secrets and commercial secrets. The unauthorized use of such
information by persons other than the holder is regarded as an unfair practice
and a violation of the trade secret. Depending on the legal system, the
protection of trade secrets forms part of the general concept of protection
against unfair competition or is based on specific provisions or case law on
the protection of confidential information. The subject matter of trade secrets
is usually defined in broad terms and includes sales methods, distribution
methods, consumer profiles, advertising strategies, lists of suppliers and
clients, and manufacturing processes. While a final determination of what
information constitutes a trade secret will depend on the circumstances of each
individual case, clearly unfair practices in respect of secret information
include industrial or commercial espionage, breach of contract and breach of
confidence.”
How do you gain trade secret protection as a startup? As a young company, you may not have the
resources (just yet anyway) to build a fortress around your secret sauce, but
what you can do is put layers of protection in place to keep your secrets
safe. This may consist of limiting
employee access to the source or creating employee/ visitor confidentiality policies
that require signatures. It may also be
attained by insisting that everyone your speak with about your idea/ technology
signs a non-disclosure agreement (NDA).
The hard part that technology entrepreneurs often face is that they instinctively
want to share their idea with the world.
Consider however that even the Google algorithm from their inception as
a startup to this very day as a global corporation is layered in trade secret
protections. The better you protect your
ideas from the beginning the stronger your trade secret defenses may be.
Patents can be very expensive whereas trade secrets often
require putting cost effective layers of protection around your
innovations. So before you start
shelling out those sacred startup Benjamin’s toward a patent, consider if trade
secret protections may be a viable alternative for now.
Legal Disclaimer: The views in this blog are merely the opinions of
Eric Everson and should not be considered or construed as legal advice. As a former technology entrepreneur and
software engineer prior to law school, he currently serves an Adjunct Faculty
member of the Herzing University Technology Program Team. As an emerging scholar in global intellectual
property law, coaching early stage technology companies is a passionate area of
his focus. #TINLA (This Is NOT Legal Advice)
Tags: Intellectual Property, Startup, Startups, Trademark,
Trade Secret, NDA, Non-disclosure Agreement, IP, IP Law, Early Stage Venture,
WIPO, Patent, Law, Legal Protection, Innovation
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