FOUR RATIONALES WHY A SOFTWARE STARTUP SHOULD FILE A PATENT APPLICATION
A software startup is invariably moving fast, and has a lot going on.
And a lot of time, money and focus goes into product development, and working out what the market wants.
How closely will the product today even resemble the product in 12 months?
Another issue which can be hard to gauge in advance is the difficulty you may encounter in seeing the patenting process through. This is where really good advice is invaluable to your decision-making. A marginal application only exacerbates the factors of time, expense and focus mentioned.
Sure, you can pull out any time, but that can be a big sunk cost, and believe me sunk cost bias is very, very real.
A patenting exercise only adds to the workload of your software startup. It is another footprint of time and money and focus that must be accommodated. Is it worth it?
Simply put, patenting may not create a great deal of value. So, OK, no, the short answer is your software startup may not need a patent.
There are exceptions, of course, and we'll talk about those later.
As as aside though, it is worth making one important point. You absolutely must however OWN the IP you THINK YOU OWN.
That's a mission critical, a non-negotiable requirement.
You might be tempted to become blasé if you have decided to go the 'no patent' route. This is a mistake. A contentious claim to IP ownership is serious BAD NEWS.
And often it's not whether the claim is valid but whether it's plausible. Funnily enough, valuable IP and a thriving venture tends to attract claims that might not otherwise surface.
I mentioned we'd return to why you might considering patenting for your software startup.
There are no hard and fast rules. You must make your best informed judgement based upon information to hand, and circumstances and the commercial landscape in which you operate.
Below are some examples for when patenting CAN be a good idea if not essential.
So here are the top reasons you should considering patenting as a startup.
Your startup is founded on a key and important technical innovation that is foundational to the value offered. It's synonymous with the startup, and the entire point of difference. That won't change, and whatever features you add later will only be incremental compared to this breakthrough. Patenting is thus a now or never proposition. And not patenting goes to ongoing commercial viability, and exit value.
2 – Investment readiness
Your startup will require some significant funding fairly early on. Patenting is optional from a competitive perspective. You assess the risk of copying is not especially strong. But you expect a solid patent position will help in raising funding. And on better terms than may be available without patent protection. This is a due diligence response — your informed view is the process may not be essential, but you're not the one deciding the issue. Essentially, you expect the cost to achieve patent pending will pay for itself.
3 — Deal-making flexibility
Your startup may not end up operating what it builds. One possible outcome is the venture relies on licensing out the evolving technology to others. A patent provides robust framework for structuring a commercial deal for the underlying technology. As a bonus, there is a disincentive way from reverse engineering and towards deal-making.
4 — Strengthening market authority
Your startup has wide appeal, and in a market that is hotly contested. It's also genuinely a new offering. You can patent now, or patent later as you anticipate strong product development as the offering is refined. You'd feel more comfortable putting some protection in place early for the core initial offering as a disincentive to others. You'd prefer to reduce the risk of competitors following you as it will dilute your uniqueness and split your market.
Summary: pros and cons
Reasons to consider patenting as a startup:
safeguarding foundational technical innovation
strengthening market authority
Reasons to dismiss patenting as a startup:
administrative overhead ('focus')
product likely to pivot or is marginally patentable anyway
You may not need a patent as a software startup. There are many specific situations however in which a very clear rationale exists for patenting. You certainly need to own the IP you think you own regardless, less an ownership challenge arise.