51. What founders need to know about patents and intellectual property for startups - Adam Philipp

Investors frequently pepper startups with questions about their intellectual property and how well it is protected. Most founders know very little about this somewhat arcane and complex topic. Fortunately, with a bit of information, you can start making the right decisions for your business and speaking intelligently about the issue with angels and VCs.

While I have written several patents over the years, I am far from an expert, so I brought in Adam Philipp. Adam is the founder of the IP law firm AEON Law, a patent attorney, and has been practicing IP law for over 25 years. His area of emphasis covers a wide variety of patent, trademark, copyright, and trade secret issues, focusing on software and security-related applications. He is the perfect person to get you up to speed on the basics and some initial strategies.

If you have any questions or would like us to go deeper on some topic, please let me know in the comments. I am sure Adam would be happy to come back for another episode. You can find Adam’s law firm at aeonlaw.com and follow him on LinkedIn at https://www.linkedin.com/in/adamphilipp/ and @AdamPhilipp on ClubHouse where he can be found offering the occasional “Patents and IP Law AMA.”

Here is an edited summary of some of the key points from our conversation: 

What is intellectual property?

There are four kinds of intellectual property.

Trademarks

Trademarks protect your brand. They cover things like your name, logo, and slogan. Adam likes to talk about Trademarks first with founders because they are the source of most issues and collisions early on. Protecting your brand with Trademark registrations is quick, effective, and inexpensive.

Patents

Patents protect inventions. These are not just ideas. Patents cover the idea combined with the understanding of how to implement the concept. Patents cover technologies, processes, and products.

Copyright

Copyright protects content, including written works, images, or art—anything generated by some creative act and captured in some form.

Trade Secret

Trade secrets are any secrets that you keep that are valuable to your business. There is no formal government process for creating a trade secret. What matters is that the information stays secret. As soon as it becomes publicly known, the protection evaporates. You protect your secrets with security, contracts, employment agreements, and non-disclosure agreements.

What should founders do early on to protect their intellectual property?

Adam suggests that founders use simple tools early on to protect the most important ideas in the business. To save money, he recommends using provisional patent applications to ensure the priority of your invention. You can then take the next year to test the market and see whether the concept is valuable enough to warrant the cost of a full patent.

Provisional patent applications cost less than a quarter as much as a full application and can be filed quickly and with relatively little effort. Having a provisional patent filed allows you to tell potential investors that you are taking appropriate steps to protect your invention and create barriers to entry for competitors.

What are the elements of a patent?

A patent is made up of three parts, description, diagrams, and claims. Of these, the claims are the most important because they define the protected invention’s exact scope. A competitor only infringes your patent if they copy every element in one of your claims. If they can skip or alter even one part, you would not have any ability to stop them.

How can a founder talk safely to investors without an NDA

The best practice is to get a provisional patent in place before revealing anything to anyone. In the US, you have a year to file a patent before disclosing an invention, but that does not apply in other countries, so you need to file first if you ever want to have protection outside the United States.

It is generally safe to talk about the problem you are solving as long as you don’t specifically describe how you solve the problem. Then, once the other party is interested, you should be able to get an NDA in place.

Suppose you are going to present your business publicly, like in a pitch or business plan competition. In that case, Adam often suggests filing the whole presentation or document as a provisional patent to ensure anything you say gains protection. Fortunately, it is always safe to talk to your lawyers about your inventions because they have an obligation to protect attorney/client privilege.

When should you file your patents?

Ideally, you should file patents before you reveal any information to people outside the company. If you are only concerned with US patent protection, you can wait as long as a year, but that is dangerous. Founders often get busy and might miss the window to file, leaving their inventions wholly unprotected.

How do you enforce patents?

Patents don’t prevent competitors from infringing on their own; you need to take action to enforce your patent. The first step is to advertise the existence of your patent on your website and other materials. The next step is to notify the company that they are infringing on your patent. However, if they choose to continue practicing the invention, you will need to sue them for damages and injunctions.

How should startups use copyright?

Copyright is one of the most cost-effective and least expensive protection if you create valuable content. Importantly, it only covers actual copying of content but not independent creation of something similar. Also, you must register your copyright to be able to enforce it for statutory damages.

If there is a likelihood that competitors might copy your source code, it should also be registered. If you use contract developers or have a high turnover, this can be an issue. When registering copyright for your code, be sure that you use obfuscation to prevent people from grabbing your source from the application.

Patents vs. Trade Secrets

For intellectual property will be valuable for decades, trade secrets have the advantage of never expiring. However, once someone reveals the secret, the protection is destroyed. If you can’t identify and litigate against the leaker, then anyone can use the revealed content.

One option is to file a patent, and request that it not be published, while also treating it as a trade secret. You would only choose to publish the patent if the secret becomes publicly known. For source code copyright, obfuscation allows you to register the copyright while keeping the content a trade secret.