Test 5: How to Develop a Basic Intellectual Property Strategy for Your Business or Technology Idea

Can I protect the idea? Should I? Do I have freedom to operate?

[This post is part of a series of blog posts titled “6 Tests to Know Whether You Should Pilot Your Idea” and focuses on Test 5: Intellectual Property. The full blog post series is available in a downloadable ebook. It is covered in more detail in the online course Opportunity Assessment for Entrepreneurs and Innnovators. Click here for a summary overview of all 6 tests, here for the previous post (Test 4: How to Quickly Check Financial Viability of Your Business or Technology Idea) and here for the next post (Test 6: Do You Have the Right Team to Commercialize Your Business Idea or Technology). Subscribe to the Moolman Institute newsletter (in the footer at the bottom of the home page) to be notified first when more content like this is posted.]

Why is this important?

Idea image

Can something be overrated by some and underrated by others at the same time?

That seems to be the case for intellectual property (IP). Over 95% of patents are never licensed or commercialized. But the few that do get commercialized in some cases create tremendous value.

And it is not only patents that have such divergent value. The value of all types of IP varies widely between industries, technologies, business models, territories and over time. For example, whilst patents are pivotal to the pharmaceutical industry, they have limited value for the military. Brands & trademarks are central to the fashion industry, but not to gold producers.

To navigate this tangle for your business or technology idea, you need to answer 3 basic questions:

  • Can I protect it?
  • Should I protect it?
  • Do I have freedom to operate*?

* Freedom to operate (FTO) refers to the ability to execute your idea without infringing on others’ intellectual property. You want to find out about potential infringements early to avoid a mortal blow later.

Intellectual property paranoia

Paranoid person imagePeople are usually too paranoid about secrecy. Test and evolve your idea with friends and colleagues.

Everyone is too busy with their own lives to drop everything and steal your idea! And you need a passionate champion to make anything succeed.

As Thomas Edison said, “The first requisite for success is the ability to apply your physical and mental energies to one problem incessantly without growing weary.”

Yes, there are limits to sharing – use your common sense. Don’t share your idea with someone well positioned to exploit it (such as a company with similar products or services) without protection. At least sign a non-disclosure agreement (NDA) or file a provisional patent application before talking to them.

Both protection options have factors that colour their value. NDAs have limited restricting power (you typically won’t have the money to enforce it) and patents have many considerations:

  • A patent is a business tool, nothing more;
  • It only gives protection if you have the money to enforce (“a patent is a sword, not a shield“);
  • It discloses details of your idea;
  • Patents only protect in the countries where you file;
  • They are expensive;
  • They can be circumvented;
  • Other IP protection methods might be more appropriate (such as trade secrets, copyright, registered designs);

Patents do have their place. Even though you might not be able to enforce, larger companies can – this creates potential for future licensing and ring-fences value for you.

You can file a provisional patent application at low cost (especially if you are a small business filing in the USA) and then have a year to figure out if the idea is worthwhile or if you want to protect it with a patent. (For South Africans, IdeaNav is a service with reasonable prices for filing provisional patent applications, trademarks and registered designs.)

How can I check this quickly at low cost?

Here are four steps for developing a basic IP strategy for your business or technology idea.

Step 1. Consider what type(s) of IP might be relevant for your idea

There are several types of IP protection, such as:

Old patent image

  • Trade secret – This is confidential information that is not in the public domain and that confers an advantage to the holder. Most countries have laws protecting trade secrets for as long as efforts are made to maintain secrecy.
  • Copyright – This is the automatic right that creators have over their literary and artistic works, such as books, advertisements, online articles, software programs and paintings. This typically persists for 50 to 75 years after the creator’s death.
  • Registered design – Aesthetic or functional design aspects of physical items can be protected. It provides weaker protection than patents but is granted more easily and is useful in industries where design is a prominent aspect. Designs can typically be registered for 10 to 15 years.
  • Patent – This provides protection for inventions that are (1) novel, (2) unobvious based on the current prior art, and (3) useful (have industrial applicability). Patents confer to the holder the right to exclude others from using or applying the invention in exchange for full disclosure. Patents are typically granted for a period of 20 years from date of filing of the initial patent application.
  • Registered trademark – This is a sign that distinguishes the products and services of an organization from those of others. It usually consists of either or both words and an image (logo), but shapes, sounds, fragrances and even distinctive colours can be trademarked. These last for as long as the trademark owner renews the registration (usually every 10 years).
  • Geographical indications – This signifies that a product originates from a specific geographical location and that it possesses specific properties characteristic of that location (for example Champagne, Port or Kobe beef).

The World Intellectual Property Organization (WIPO) provides a basic overview of the types of IP and their benefits and disadvantages.

Often you will use multiple types of IP to protect different aspects of your business or technology (for example copyright for software, a mix of trade secrets and patents for products and registered trademarks for your brands).

Patents, designs and trademarks are registered per territory (country or group of countries) and costs can balloon. Hence you also need to think about where you plan to operate.

There are additional barriers to entry (such as regulatory approvals or exclusive partnerships) that you can (and should!) leverage for your idea.

Step 2. Do a prior art search

“Prior art” is any information or evidence that (part of) your invention is already known somewhere in the world. It does not have to be in written format – it can be in the form of a video, physical product or any other medium.

Prior art searching is most relevant if you are planning to patent, but you should still do a search either way. You need to understand:

  1. If your idea is novel;
  2. Who the competition is;
  3. If you have freedom to operate.

I am planning a course on Intellectual Property for Entrepreneurs and Innovators that will cover aspects such as how to do a prior art search in detail. In the interim, here is a basic guide to get you started. You should also search existing trademarks and designs if you are planning to file such (see for example the WIPO Trademark & Brand databases).

Step 3. Think about encumbrance

Has anyone else contributed to the idea that could lay claim to an ownership share later? If there is any risk of this, make sure to handle it early onbefore there is money on the table. Come to an agreement with the other party on ownership and benefit sharing as soon as possible. Don’t make assumptions and reduce any agreement to writing.

Step 4. Decide on your basic IP protection approach

This will most likely change over time, but since early IP decisions can be irreversible (such as publishing software as open source or making an idea public before patenting), you need to have a basic strategy from the start.

Make initial decisions on your IP protection strategy based on the information and insights from Steps 1 to 3. Answer the questions: Can I protect it? (How) should I protect it? Do I have freedom to operate?

Real-world examples

Instead of a single real-world example, here are some serious successes and a few frivolous failures.

Serious successes

Polaroid image

  • Polaroid – Edwin Land invented a new material for polarizing light, patented it and built a successful business based on the patent. By his death in 1991, he had 535 patents in his name.
  • Google’s PageRank patent – for those of you who remember the days of Altavista (busy page alert) and Ask Jeeves, PageRank was a revolution. No more finding your search result on page 27 (or not at all). This is the patent that launched the mighty Google empire that touches all of us today.
  • Dropbox’s network folder synchronization patent showed everyone else how online file sharing should work.
  • The quad-rotor drone was invented by Edward Vanderlip in 1959 already. His employer at the time, Piasecki Aircraft Corp, obtained a US patent for this invention in 1962.

Frivolous failures

Patent troll image

  • A Non-Practicing Entity (also known as a patent troll) is a company that does not make anything itself but focuses solely on enforcing its patent portfolio – mainly through suing other companies. They are the bane of small companies, who often cannot afford litigation and are forced to settle out of court, even when the case has no merit. Eon-Net supposedly invented online form completion, but in fact filed some broad, vague patents about digitising documents. Eon-Net sued over 100 e-commerce companies for patent infringement over more than 15 years, making many millions of dollars in settlements, before being successfully countersued in 2009.
  • HP received a US patent grant in 2017 for “Reminder messages”. It describes calendar reminder messages sent from one computer to another. If that sounds like old news, you are right. (And while you’re there, check out some of the other “Stupid patent of the month” awards!)
  • Harley Davidson tried for more than 6 years to obtain a trademark on its motorcycles’ distinctive engine noise, but finally gave up due to strong opposition from other motorcycle manufacturers.
  • Walmart tried to trademark the yellow smiley face 😮 but lost 🙂.

The lesson? IP protection is important, but don’t lose focus on building your business.

Moolman Institute logo

In the next post in the series I discuss the 6th and final test: how to analyze your team strength (Is there a passionate champion? Do I understand what skills are missing?).

Let me know in the Comments section what you think of this method or if you have a good example of where things went wrong based on the Intellectual Property criterion.

This methodology is part of a Moolman Institute online course called Opportunity Assessment for Entrepreneurs and Innovators. The course guides you step-by-step through the 6 tests and provides you with a set of practical tools and templates to make it as easy as possible for you to get to product launch or idea demise.

If you would like more useful content like this or get notified when the next course launches, subscribe to the Moolman Institute newsletter on the home page.

Photo of disco globe by Vale Smeykov on Unsplash. Photo of paranoid man by Ryan McGuire on Gratisography. Photo of patent troll by maritravel on Pixabay.

Posted by Sean Moolman

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