Does Your Startup Need a Patent? The Answer Isn’t Always Obvious
by Bart Emery
One day, a startup founder I’ve known for years joined our regular Zoom check-in call, looking crestfallen.
“What’s wrong?”
“We just got a patent infringement claim.”
He put the document up to his webcam to show me. I immediately recognized the letterhead — it was from a major law firm representing one of the largest tech companies on the planet.
“Wow, that’s impressive. Congrats!”
My startup colleague looked confused.
“What? This is horrible news!”
“Not exactly,” I said. “This means you’ve made it. This is a big company’s way of telling you that you’re successful enough to appear on their radar.“
To be sure, legal threats aren’t always a positive milestone, but often they are — which illustrates the confusion and ambiguities around patents and startups.
Every year, well over half a million patents are filed with the US government. Roughly half of them are approved. A fraction of that number are actually leveraged to create a recognizable product that reaches the marketplace. Big companies like Apple continually fill a defensive moat with patents to protect their core business, even if most of these patents are rarely applied.
The sheer size of the patent database is such that it’s led to a frequent question I’m asked by startups. Right after, “Should we patent our invention?”, their most common query is, “Should we pay a lawyer to find out whether our patent might overlap too much with patents owned by others?” It’s incredibly difficult (and costly) to know for sure.
One portfolio company I work with (let’s call them “Doctor Widget”) agonized whether to spend a significant part of their investment capital obtaining a patent lawyer’s opinion that they were clear to go on the market. This was for a medical device they had invented and already patented, but that didn’t allay their concern. How could they possibly know if it inadvertently infringed on a patent buried deep in the back room — and if that patent was owned by a giant company with an army of lawyers at the ready?
I’ve seen many companies spend a mass of billable hours on patent filings and clearance. And often it’s not worth their time and money. Here’s some points to consider first:
Treat Patents as an Annual Expense
Average patent costs per issued patent can run around around $30K — but not all at once. It’s an understandable but mistaken assumption that the patent process is a one-time expense. Usually, less than half of the total cost happens upfront, and the majority of that is attorney drafting and preparation time. To break it down in a typical timeline:
- There is a brief period of silence while the patent awaits examination by the patent office.
- Once the application is picked up by a patent examiner, there is often a 2–3 year period where your attorney will have to go back and forth with the patent office.
- These above attorney/patent examiner meetings can happen up to a dozen times, billing you hourly for creating each of these interactions/responses.
This process, called patent prosecution, can be surprisingly expensive if you haven’t budgeted for it.
I recently advised a startup that filed a large number of patents, but the patent prosecution expenses were beginning to weigh on them — they had already spent $10–15K on each, and were wondering if they should stay the course to complete the clearance. In their particular case, there was a lot of overlap and less of a clear need for some of the patent coverage, and it made sense to them to drop some of those patents — while doubling down on the several that really mattered to their core business.
In any event, it makes sense to figure out up front what you can pay annually to protect your patents, and expect this to be a yearly ongoing expense. It is better to have a smaller number of quality patents that you can take all the way through the process, than to overspend initially and have to pull back later.
Should I patent my design sketch/wireframe — or wait until it’s a functioning app?
Startups often ask me a variation of this question; my frustrating answer is, “It depends.” A starting checklist for a more definitive answer includes:
- Is what you’ve designed truly different, innovative, and above all, core to your business?
- Is the tech you want to patent something that helps you against competitors?
- How much does it help your business? (Again, consider the annual costs of patent protection.)
Think through all the different ways your invention’s purpose can be done — and figure out what’s truly proprietary about it. For instance, algorithms alone may be patented.
Inflect-funded startups often have a proprietary way of analyzing a patient’s health metrics or data and communicating that to a doctor — that’s become a very common patent to file and generally speaking, doing so can be quite valuable. Given the explosion of health tracking devices, you definitely want to consider protecting it.
When Springing for Patent Clearance is Valuable
Getting a patent clearance opinion is a separate process that can easily cost $30–50K in attorney time, and if complex, can exceed $100K. But if you suspect you have a potential infringement problem, the very act of performing patent clearance can reassure new and incoming investors that their bet doesn’t come with the danger of an unexpected lawsuit, if the results are in your favor. It could also help your position and response if you are accused of patent infringement.
With the “Doctor Widget” example mentioned above, I advised them — based on the specifics of their business and fundraising — to keep spending the money on a legal team that would take the time to clear their patent. That’s my general advice for medical device patents, by the way, which often do have overlaps. In this case, it did reassure investors, and contributed to a successful capital raise and more certain product launch.
One nice feature of working with your patent attorneys on a patent clearance opinion is that it remains confidential between you and your attorneys. It can be used informationally, or allows you to get ahead of suspected problems and develop a stronger non-infringement position before you go on the market. If you are in software and other less tangible areas, patent clearance is often frustratingly inconclusive, so it might not be recommended — unless, that is, you suspect there is a specific patent or competitor that could become an issue.
When a Lawyer Contacts You, Don’t Panic — Even When It’s a “Patent Troll”
I’ve seen a vaguely threatening legal letter subsequently turn into a friendly acquisition; I’ve participated in phone calls where my startup client is positive they’re about to be sued — and instead, come away with a partnership or investment offer. (Speaking of which: you definitely want to take such calls with your lawyer on the line.)
In the end, few big companies actually want to sue small ones — even if successful, it costs a fortune and is often uncertain; it usually makes more sense to partner, invest or acquire. And most small to mid-sized companies realize going after one of their competitors in court is a mutually assured destruction situation.
I’d even offer the same “don’t panic” advice for legal letters from firms that are often called “patent trolls”. For one, they tend not to aggressively go after small companies, since there’s little to gain. Definitely loop in your counsel and craft a strategy and response, but don’t let it derail anything. And while patent trolls have been the blight of many startups, also understand that if you do have a patent you’re not using, a troll is occasionally the sole interested customer.
Yes, you read that right: For some tech startups looking for any way to get a financial return out of their existing IP portfolio, patent trolls are sometimes the only ones who’ll pick up the phone. Often they are the only ones who can go after big companies as well, because there isn’t a risk that the big company turns around and sues them for patent infringement right back.
Finally, filing a patent is a tangible way of showing investors that you believe in your business. If it is a valuable competitive advantage, it’s worth paying for a patent — and shows investors that you are thinking long term.
And while getting a threatening legal letter can often be a great milestone of success… I probably wouldn’t lead with it.
Bart Emery has been Corporate Venture Capital Manager for Inflect Health since 2021, previously worked in corporate development and venture capital for the Mayo Clinic, and has been part of several venture-backed startups with successful exits. Based in Colorado, Bart earned his Bachelor’s Degree in Biology from Cornell University and his JD/MBA from the University of Colorado at Boulder.
