by William Mann on January 31, 2013

As a start-up, dealing with law firms can be a “delicate” process. When an hour of time spent chatting up an associate can cost $600, it can be difficult to justify. However, as a device and medical IT start-up it is essential to have an intellectual property strategy.

The first thing people usually think of with respect to patents is that they create barriers to market entry. True, the patent can protect the firm from another “genius” coming up with the same brilliant idea. However, it is very expensive to enforce and prove infringement in court. As a start-up you cannot afford to spend valuable time in court and are basically left with one option – threaten legal action.

From a start-up perspective, it is far more important to have a patent strategy for the following reasons:
– Strengthen your pitch and signal to potential investors that you are committed to the idea
– Build a patent portfolio to increase the valuation of the firm and make yourself a favourable acquisition target
– Open up opportunities for licensing

Once you’ve decided to file an application, you are faced with various options: pursue a Canadian patent, a US patent, or enter countries through the patent cooperation treaty (PCT). Entry into the US and Canada is far more cost-effective compared to entering countries through the PCT, but you are left exposed in other large potential markets.

In order to minimize the up-front expenditure and secure the earliest possible patent priority date, you can put together most of the provisional application yourself. Once submitted, you would have one year of time to convert the provisional into a complete patent application. The provisional application describes the system, potential use cases, and is backed up with diagrams and illustrations. Before submission, it is crucial that a lawyer adds a list of claims, as well as review the use cases.

By writing most of the provisional application yourself, you are able to get the PCT application submitted for ~$10k. If you can establish a strong relationship with a law firm, you may be able to split and backload most of the payment, decreasing your up-front expenditure. Within the year, it is critical to address the go-to-market strategy and asses if there are markets you would like to enter outside North America. This is particularly important since the PCT application will be independently reviewed by each country you enter, along with an associated cost of filing. For example, filing in Japan may cost around $14k, Brazil approximately $7 and Australia around $6k.

When thinking about patents:
– Figure out your go-to-market strategy and size of the market in the countries you would like to enter. PCT applications can get expensive and you want to make a conscious decision on where you want to enter
– Be mindful of dates – date of first disclosure, filing date, conversion of provisional application to full application, country entry dates
– Use a law firm that deals with start-ups! Negotiate a payment schedule that best aligns with your financial standing
– Seek out grant funding that may cover IP expenditures

Disclaimer
I am not a lawyer (seriously). The blog post is based on our own experience. Seek professional legal advice with respect to your business.