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Sunday, February 13, 2011

How do I patent a good idea and develop it into a sellable product?

First, congratulations on your new idea!  Patents are designed to protect new ideas or “intangible property”.  It’s intangible, because unlike a car or real estate or just about anything else, you cannot touch it.  Initially, it is merely a neural spark or “flash of genius”.  As much effort as you may have put into coming up with that idea, answering the question of what to do with it is even harder.

We need to begin by splitting up the question.  Contrary to what late night infomercials would have you believe, patenting a good idea and creating a sellable product are two entirely different processes which, at the best of times, only partially overlap. 

Make sure that a patent is even the right protection for what you have conceived.  Other protections are available, such as trademarks (which may include words, slogans and logos), trade secret (like the formula for making Coca-Cola) and copyright (for works of authorship like sculptures, plays, books, movies, paintings, etc.).  In addition, there are sub-categories of patents, including plant patents (surprisingly, these protect plants!) and design patents (to protect the unique appearance of an object). 

Maybe no protection at all is needed.  The book, Don’t File a Patent by John D. Smith discusses this proposition at length.  The key question is what does a patent do and how do you plan to use it.  Keep in mind that a patent is an “exclusive right”.  This means that it gives you the ability to exclude others from doing things, which mostly amounts to preventing them from copying your claimed invention. 

Just as importantly, a patent does not give you the right to do anything!  Just because you patent a new idea doesn’t mean that your practice of the invention does not infringe the rights of other patent holders.  Most likely, your idea is an improvement on earlier work and that work may still be covered by patent protection.  This is important in determining whether you or the company you license or sell your idea to has “freedom to operate” the invention.

Most likely, what you will be seeking to obtain is a utility patent, which protects ideas for a term of 20 years from the filing date in the United States and most other jurisdictions. 

Did I mention that you have to issue a separate patent application in every country where you want to protect your idea?  The costs for covering an idea are staggering and would be overwhelming for most individual inventors, running into the hundreds of thousands of dollars if you were to issue a patent in every country in the world. 

This is where having a filing strategy prior to putting together an application is important.  Consideration of where your customers live, where your competitors are, relative protections offered by patents in various countries and similar market research will inform the decision of where you will ultimately patent your idea.

Fortunately, there is a way to hedge your bets if you are just starting out and do not yet know whether this will be a big hit.  The Patent Cooperation Treaty (PCT) allows you to use a single filing to establish priority worldwide.  The cost of filing a PCT application is about the same as a normal filing in the United States alone and will give you about a year to decide on which specific countries you want to pursue for patent protection.

Because of all of the above, as well as the nearly impenetrable prosecution process (“prosecution process” is not nearly as ominous as it seems – it is simply the process of obtaining a patent) discussed below, it is often prudent to employ a registered patent agent or patent attorney to represent you.  The few thousand dollars charged by these professionals up front can potentially save you millions down the road.

However, let’s assume you don’t’ have the scratch to hire a patent professional.  There are a number of guides available to walk you through the patenting process.  One of the best is Patent It Yourself by David Pressman. 

In order to patent an idea, it must be “patentable subject matter”.  Don’t be put off by the legalese, this only means that you cannot patent laws of nature, perpetual motion and the like.  The statutory language can be found in Title 35 of the U.S. Code, a copy of which can be found here.  Start with section 101 as a roadmap for the general patenting process.

Assuming that your idea is, indeed, patentable subject matter, you must now show that it is useful and nonobvious in light of what has been done in the past.  No reinventing the wheel! 

In addition, the invention may not be publicly disclosed before you file the application.  In the United States, you have a one year grace period from the time when you disclose an invention until you have to file your application, but this does not apply to most of the rest of the world. 

With the exception of Taiwan and several smaller jurisdictions, most of the world operates under the “absolute novelty” standard, which means that once you publicly disclose your idea, you may no longer patent it.  This is where the PCT filing discussed above becomes important.  By filing with the PCT, you essentially are filing an application in every country of the world (with minor exceptions for the few countries that have not signed the treaty). 

You should always file a patent application before making a public disclosure.  Since there is no hard and fast definition of what a “public” disclosure is, it is always better to file an application before any offer for sale, sampling or similar communication with a third party.

Once you get your patent application on file, you can start on developing it into a sellable product.  There are many books and courses that can teach how to test and develop a new product, so I will limit this discussion to how patents can help with this process.

It is important to realize that most companies have a strict policy against accepting unsolicited ideas.  Sending a letter with your idea to the VP of marketing will normally result in receiving in return a letter from his in-house attorney stating that the idea was unread and that the company does not accept unsolicited offers.  This protects you and the company, since you do not want your idea stolen and they do not want to be accused of stealing, especially if they already are working on a similar project.

Many of the infomercial “invent it yourself” companies try to get around this by providing you with a form secrecy agreement.  These are often one-sided and will not be signed by any company or individual within the company, especially if you hand it to them right before your pitch.

A better approach is to identify a company that produces products similar to what you have invented and arrange to discuss your idea once you get a patent on file.  After the patent has been filed, you can refer to your idea as “patent pending”.  A filed patent application gives you the ability to then contact others and discuss your claimed invention without the need for a secrecy agreement or similar protection.  It also establishes your seriousness and sophistication when it comes to protecting intellectual property. 

From here, you can begin to discuss the nuts and bolts of a commercial agreement that will take your sellable idea to market.  There are myriad ways in which you can accomplish this, including using a third party manufacturer to make your product and then marketing it yourself or selling your idea to others.  Often the former approach will yield the greater financial reward in the long run, but if you do not have the resources to pursue that avenue, you may sell your idea to another company by selling or renting your patent and related know-how.

Selling your patent is called an “assignment” and the inventor is usually paid a lump sum up front and then walks away from the process.  Renting the patent is called a “license” and is typically composed of a lump sum, ongoing royalty payments based on how muc product is sold or a combination of the two.  Negotiations for patent licenses and assignments can be very lengthy especially if the buyer wants to complete his or her “due diligence”.  You can think of due diligence as similar to a home inspection and this will often include a reexamination of the state of the art to assure freedom to operate, as well as checking to see whether you have full ownership rights to the patent.  Like obtaining a patent, negotiating a patent assignment or license is tricky and you should consider retaining an attorney to help you at this stage.

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