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Patents? You Don't Need No Stinking Patents!
INC. | TECHTOWN | Erik Sherman
Your No. 1 job is to get to market and start making money. Here's why protecting your IP should stay off your to-do list.
Twitter has tried innovation in a number of areas of its business. Now it's extending that to a new area: patents. Or, rather, how it uses patents. As it says in a blog post, the company plans to make a pact with its employees that it calls the Innovator's Patent Agreement (IPA):
The IPA is a new way to do patent assignment that keeps control in the hands of engineers and designers. It is a commitment from Twitter to our employees that patents can only be used for defensive purposes. We will not use the patents from employees' inventions in offensive litigation without their permission. What's more, this control flows with the patents, so if we sold them to others, they could only use them as the inventor intended.
Twitter calls it a "significant departure from the current state of affairs in the industry," and the management team is right. Look at Yahoo and Facebook suing each other for alleged patent infringement, or Microsoft using the threat of a major patent lawsuit to win royalty agreements from hardware vendors that use Google's Android operating system. Or so-called patent trolls, which purchase patents, hold them in a portfolio, and then sue companies large and small for alleged infringement.
Twitter says that it wants patents only for defensive purposes. If it's willing to back that up (assuming that it can't talk employees into agreeing to go after someone), it's news. But Twitter, with its $1.16 billion in venture funding, is hardly the average company. Patents can be expensive to obtain and maintain. Litigation over whether someone infringed your patent is expensive.
The real cost of getting a patent
You have to design an IP protection policy around your business, not the other way around. John D. Smith, an inventor and entrepreneur, wrote a book called Don't File a Patent!, which comes from his experience developing and selling a hurricane window protection device. He had other patents from the past and tried to patent this, but the U.S. Patent & Trademark Office rejected the patent three times.
The conclusion he reached was that he had spent "almost $25,000 in legal and government filing fees" to no useful end. He says that he would have been better off putting the money into selling the product.
Is this just the bitter reminiscence of an entrepreneur who didn't get what he wanted? Not if you look at the PatentlyO blog, written by Associate Professor Dennis Crouch, who teaches patent law, and well respected by those in the patent community. Crouch reviewed the book:
The book is directed toward individual inventors and small companies with little or no budget for intellectual property or litigation. Although the book takes an overly-extreme position, Smith suggests the valid argument that the limited resources of a small entity is often better spent on other business development activities.
Protecting IP can wait
Patents can offer value to companies. For example, venture capital investors might insist on them. They can give an entrepreneur the legal standing to demand redress from someone who encroaches on the patent... assuming that the entrepreneur has the money to litigate the case and can come to a contingency arrangement with a qualified law firm.
But, if you have limited funds, getting to market and creating revenue are more important steps. There are other ways to stymie competitors. A better product, smarter marketing, better customer service, and more effective business processes are just a few examples of how to get ahead of other companies.
It would be great to have all the advantages in the world, but chances are you never will. So learn to creatively see what tools you actually do have and then find ways to use them to drive your success.
Erik Sherman's work has appeared in such publications as the Wall Street Journal, New York Times Magazine, and Fortune. He is a blogger for CBS MoneyWatch and InsideInvestorRelations.com. @ErikSherman
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