Alternatives to patents: ways to protect your startups IP without going broke
2/12/18, Updated: 2/8/19
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President, MP LLC
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Even in the early stages of building a business, many entrepreneurs are attracted to exploring patents. For most entrepreneurs, protecting your business idea from getting stolen is usually a priority. As a young entrepreneur, I made a lot of mistakes. One of those mistakes was not protecting the intellectual property (IP) with patents in my businesses, specifically the processes, software, and designs I created. I could have certainly made it more difficult for competitors to come into our market back when we first launched but hindsight is truly 20/20. One, we didn't have confidence everything was going to work like we had laid out and, two, we certainly did have the customers or gross revenue like we did 10 years later.
Of the four different IP's identified by the USPTO (trade secrets, copyright, trademarks, and patents), patents are significantly the most expensive, time consuming, and carry an unknown result going in. For the most part, not pursuing patents did not hurt me. I stayed focused on operations and executing my business plans day in and day out. If I spent thousands to protect my ideas, I would spend thousands defending them once patented. Always remember that an idea is just organized thoughts. Writing out the idea, putting a team together, and executing that idea takes special entrepreneurial characteristics most do not possess - even if they want to knock off your idea.
So, as an entrepreneur, you have to make the decision on whether or not protecting your idea(s) with a patent is the best route to take. No matter what you hear, I know for a fact that getting your idea out there, establishing market momentum/sales, and putting strong processes in place to duplicate success trumps spending months applying for and waiting to get "protection" in a lot of new business startups. I've actually seen, multiple times, young entrepreneurs spend the majority of their critical early startup time talking with attorneys, paying those attorneys, and filling out paperwork. Yes, there are plenty of true proprietary ideas that not only "need" protecting but MUST be protected with technology leading the way. Just know if Apple, GoPro, Rolex, Ray-Ban, and many other multi-million and billion dollar companies can't stop patent infringement, you will struggle as well.
First and foremost, keep your mouth shut in the early months. I'm serious. Posting on social media, sending out emails, and even telling your friends gives you little to no positives. Identify, design, and start executing your plan to get a head start. If you are super excited and passionate about your new business idea, act on it but don't blab it to the world until it is GO TIME! There is a time and place for marketing, but the early stages is not the appropriate time.
This article is focused on other ways to protect your company without filing a utility patent, design patent, or both. I am going to put the following in bullet points so they are easy to find again. The list is critical to ALL entrepreneurs no matter how much thought (or lack thereof) you have put towards protecting your business. At the very least, do the simple things first:
So, once you get the "easy" out of the way and you still do not know what you should do, every new entrepreneur can do some or all of the following beyond just hitting the four IP categories. What a lot of young entrepreneurs do not know, TIME is actually on their side.
PURSUE FILING A PROVISIONAL PATENT
Your very next step is to get a provisional patent application completed and in to the USPTO office. This allows you to put "patent pending" on your docs, website, app, etc. This gives you 365 days to jump start your business. You do NOT need an attorney to file for a provisional patent. There are a lot of reputable online companies that charge $150 or less to get your provisional filed with the USPTO. Don't be lazy!
WORK OFF OF AND INCORPORATE NON-DISCLOSURE AGREEMENTS
Get used to working with NDA's. Just keep it in the back of your mind with everyone you work with - potential investors, mentors, suppliers, associates, partners, workers, and even commercial clients in some cases. You will run into plenty who will not want to sign NDA's with investors at the top of the list. To get around this, consider putting confidentiality statements within your business plan, supplier contracts, employment new-hire paperwork, etc. Non-compete agreements can also serve a significant purpose in protecting your business if you can get them signed.
TRADEMARK YOUR BUSINESS NAME, TAG LINE, AND LOGO
Since business names are often tied to the actual business idea, Trademarks can be very useful and can serve as an additional layer of protection. Unfortunately, a lot of new entrepreneurs forget to check if their new company name or artwork has been trademarked already. The documentation that is required to file a trademark will serve as written official proof that your idea was set-in-stone on the specified date you filed. For no other reason, this justifies getting your biz name, tag line, and logo trademarked. At the very least, get your business name completed.
USE AND NOTE TRADE-SECRETS
Trade secrets should be used only as a compliment to a patent. As an entrepreneur, you can't use a trade secret in lieu of filing a patent. Trade secrets consist of information and can include a process, formula, pattern, compilation, program, device, method, or special technique. To meet the most common definition of a trade secret, it must be used in business, and give an opportunity to obtain an economic advantage over competitors who do not know or use it. Although in 2016, the Defend Trade Secrets Act was created which strengthens U.S. trade secret protection under federal civil cause of action. But trade secret protection is still very limited. Note that a trade secret holder is only protected from unauthorized disclosure and use which is referred to as misappropriation. If a trade secret holder fails to maintain secrecy or if the information is independently discovered, becomes released or otherwise becomes generally known, protection as a trade secret is lost. Trade secrets do not expire so protection continues until discovery or loss.
DOCUMENT GALORE
Start your business with the discipline to put everything in writing. Keep it simple but use your head by noting who you have talked to about your business idea and what was discussed. By keeping a diary, calendar, or log of every discussion you have where details of your business are disclosed, you not only stay organized but you have a written history of who, what, and where your business and ideas were discussed. Your dated log will help if you find one of those conversations goes somewhere it shouldn't.
PATENTS VS. TRADE SECRETS
I get a lot of questions concerning patents vs. trade secrets so I want to outline the difference. Patents require the originating inventor to provide a detailed and full disclosure about the invention in exchange for the right to exclude others from practicing the invention for a limited period of time. Patents do expire, and when that happens,the patent becomes null & void and is no longer protected. Unlike trade secrets, patents may protect against independent discovery - the most important point of a patent. Patents also give the business owner FREEDOM by eliminating the need to maintain secrecy. While most anything can be kept secret, there are limitations on what can be protected by a patent. If a given invention is eligible for either patent or trade secret protection, then the decision on how to protect that invention depends on business considerations and weighing the relative benefits of each type of intellectual property. See the chart below showing the differences between the two.
In conclusion, the odds that your idea will be stolen is slim-to-none. I am living proof, along with quite a few of my entrepreneur colleagues. I am truly sadden by what some of the patent attorneys do to young entrepreneurs. I invest a lot of my volunteer time making sure they understand the truth. Don't inhibit your ability to sell your idea by being scared someone is going to knock it off - especially if you are passionate, driven, and possess a "no matter what" attitude that your idea will be a successful business. An investor or client who declines to work with you may actually know someone else in the industry looking to work with someone offering exactly what you’re offering. If you prevent that interaction from occurring, you could be missing a great opportunity.
Another way your fears hurt your business is that they keep you from getting feedback from others. When you discuss your idea with someone new, you get their thoughts, which in turn helps you grow your concept. By never discussing your business with others, you miss that chance.
If you’re truly concerned about your idea being stolen, taking a couple of the above-mentioned steps can give you a little peace-of-mind. But chances are, your idea is safe. Few people have an interest in stealing other people’s business concepts and putting them into action. In fact, there are far more people with ideas that won't be seen to fruition. Be proud of your invention, but share it only with those who can help you in your dream of making it a reality.
Helpful Links:
USPTO Patent Filing, Examination, Post-Allowance, and Maintenance Fees
Difference between a Patent Attorney and a Patent Agent (highly-recommend)
QuickPatents - third-party patent filing company - very helpful and competitively priced
Of the four different IP's identified by the USPTO (trade secrets, copyright, trademarks, and patents), patents are significantly the most expensive, time consuming, and carry an unknown result going in. For the most part, not pursuing patents did not hurt me. I stayed focused on operations and executing my business plans day in and day out. If I spent thousands to protect my ideas, I would spend thousands defending them once patented. Always remember that an idea is just organized thoughts. Writing out the idea, putting a team together, and executing that idea takes special entrepreneurial characteristics most do not possess - even if they want to knock off your idea.
So, as an entrepreneur, you have to make the decision on whether or not protecting your idea(s) with a patent is the best route to take. No matter what you hear, I know for a fact that getting your idea out there, establishing market momentum/sales, and putting strong processes in place to duplicate success trumps spending months applying for and waiting to get "protection" in a lot of new business startups. I've actually seen, multiple times, young entrepreneurs spend the majority of their critical early startup time talking with attorneys, paying those attorneys, and filling out paperwork. Yes, there are plenty of true proprietary ideas that not only "need" protecting but MUST be protected with technology leading the way. Just know if Apple, GoPro, Rolex, Ray-Ban, and many other multi-million and billion dollar companies can't stop patent infringement, you will struggle as well.
First and foremost, keep your mouth shut in the early months. I'm serious. Posting on social media, sending out emails, and even telling your friends gives you little to no positives. Identify, design, and start executing your plan to get a head start. If you are super excited and passionate about your new business idea, act on it but don't blab it to the world until it is GO TIME! There is a time and place for marketing, but the early stages is not the appropriate time.
This article is focused on other ways to protect your company without filing a utility patent, design patent, or both. I am going to put the following in bullet points so they are easy to find again. The list is critical to ALL entrepreneurs no matter how much thought (or lack thereof) you have put towards protecting your business. At the very least, do the simple things first:
- Reach out to a patent AGENT (not a patent attorney) and ask if they will evaluate and give a frank assessment if your business idea is protectable. Understand that there are quite a few that will take you down their sales pitch and sell you on their process. Stick to YOUR process and stay in control by not signing or agreeing to anything. Your goal is to get an opinion. Know, going in, most will not give opinions but your goal is to get them talking to get insights so you can draw an opinion.
- Do a patent search on your own. There are two clear paths in doing your own search: Google Patents or directly through the United States Patent and Trademark Office. Do a search on how to do patent research. Use many different keywords to see what other patents exist and what was granted a patent. Your keyword phrase research should have at least 10 keyword phrases that will lead to more keyword phrases. You are trying to expose as much as you possibly can within the patent search to eliminate the notion that you are wasting your time!
- Talk to a professional patent searcher that is licensed-to-practice by the USPTO. The ones with a personality will talk openly to you and even walk you through the steps, costs, and things you can do on your own. If you get lucky, they might even give you an opinion if they are familiar in your space. Note that professional patent searchers and attorneys may charge upwards of $3,000 for a patent search and a "patentability opinion". This is wasted money unless you have investors who have demanded a professional third party lead the patent search.
So, once you get the "easy" out of the way and you still do not know what you should do, every new entrepreneur can do some or all of the following beyond just hitting the four IP categories. What a lot of young entrepreneurs do not know, TIME is actually on their side.
PURSUE FILING A PROVISIONAL PATENT
Your very next step is to get a provisional patent application completed and in to the USPTO office. This allows you to put "patent pending" on your docs, website, app, etc. This gives you 365 days to jump start your business. You do NOT need an attorney to file for a provisional patent. There are a lot of reputable online companies that charge $150 or less to get your provisional filed with the USPTO. Don't be lazy!
WORK OFF OF AND INCORPORATE NON-DISCLOSURE AGREEMENTS
Get used to working with NDA's. Just keep it in the back of your mind with everyone you work with - potential investors, mentors, suppliers, associates, partners, workers, and even commercial clients in some cases. You will run into plenty who will not want to sign NDA's with investors at the top of the list. To get around this, consider putting confidentiality statements within your business plan, supplier contracts, employment new-hire paperwork, etc. Non-compete agreements can also serve a significant purpose in protecting your business if you can get them signed.
TRADEMARK YOUR BUSINESS NAME, TAG LINE, AND LOGO
Since business names are often tied to the actual business idea, Trademarks can be very useful and can serve as an additional layer of protection. Unfortunately, a lot of new entrepreneurs forget to check if their new company name or artwork has been trademarked already. The documentation that is required to file a trademark will serve as written official proof that your idea was set-in-stone on the specified date you filed. For no other reason, this justifies getting your biz name, tag line, and logo trademarked. At the very least, get your business name completed.
USE AND NOTE TRADE-SECRETS
Trade secrets should be used only as a compliment to a patent. As an entrepreneur, you can't use a trade secret in lieu of filing a patent. Trade secrets consist of information and can include a process, formula, pattern, compilation, program, device, method, or special technique. To meet the most common definition of a trade secret, it must be used in business, and give an opportunity to obtain an economic advantage over competitors who do not know or use it. Although in 2016, the Defend Trade Secrets Act was created which strengthens U.S. trade secret protection under federal civil cause of action. But trade secret protection is still very limited. Note that a trade secret holder is only protected from unauthorized disclosure and use which is referred to as misappropriation. If a trade secret holder fails to maintain secrecy or if the information is independently discovered, becomes released or otherwise becomes generally known, protection as a trade secret is lost. Trade secrets do not expire so protection continues until discovery or loss.
DOCUMENT GALORE
Start your business with the discipline to put everything in writing. Keep it simple but use your head by noting who you have talked to about your business idea and what was discussed. By keeping a diary, calendar, or log of every discussion you have where details of your business are disclosed, you not only stay organized but you have a written history of who, what, and where your business and ideas were discussed. Your dated log will help if you find one of those conversations goes somewhere it shouldn't.
PATENTS VS. TRADE SECRETS
I get a lot of questions concerning patents vs. trade secrets so I want to outline the difference. Patents require the originating inventor to provide a detailed and full disclosure about the invention in exchange for the right to exclude others from practicing the invention for a limited period of time. Patents do expire, and when that happens,the patent becomes null & void and is no longer protected. Unlike trade secrets, patents may protect against independent discovery - the most important point of a patent. Patents also give the business owner FREEDOM by eliminating the need to maintain secrecy. While most anything can be kept secret, there are limitations on what can be protected by a patent. If a given invention is eligible for either patent or trade secret protection, then the decision on how to protect that invention depends on business considerations and weighing the relative benefits of each type of intellectual property. See the chart below showing the differences between the two.
In conclusion, the odds that your idea will be stolen is slim-to-none. I am living proof, along with quite a few of my entrepreneur colleagues. I am truly sadden by what some of the patent attorneys do to young entrepreneurs. I invest a lot of my volunteer time making sure they understand the truth. Don't inhibit your ability to sell your idea by being scared someone is going to knock it off - especially if you are passionate, driven, and possess a "no matter what" attitude that your idea will be a successful business. An investor or client who declines to work with you may actually know someone else in the industry looking to work with someone offering exactly what you’re offering. If you prevent that interaction from occurring, you could be missing a great opportunity.
Another way your fears hurt your business is that they keep you from getting feedback from others. When you discuss your idea with someone new, you get their thoughts, which in turn helps you grow your concept. By never discussing your business with others, you miss that chance.
If you’re truly concerned about your idea being stolen, taking a couple of the above-mentioned steps can give you a little peace-of-mind. But chances are, your idea is safe. Few people have an interest in stealing other people’s business concepts and putting them into action. In fact, there are far more people with ideas that won't be seen to fruition. Be proud of your invention, but share it only with those who can help you in your dream of making it a reality.
Helpful Links:
USPTO Patent Filing, Examination, Post-Allowance, and Maintenance Fees
Difference between a Patent Attorney and a Patent Agent (highly-recommend)
QuickPatents - third-party patent filing company - very helpful and competitively priced
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Scott E McGlon is the President of McGlon Properties, LLC and the author of many blog post on MP Blog. He has been a serial entrepreneur, entrepreneur-in-residence, investor, and president/CEO of many successful start-ups since 1998.
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