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Why Having a Patent Doesn't Guarantee Startup Success

IP. Many of us have heard that commonly used abbreviation “intellectual property.” IP includes patents, trade secrets, trademarks and copyrights. If you have an innovative idea that could, some day help people or solve a real world problem, then being a little versed in IP, especially patents, could be very important.

In the circle of innovation, the term IP is commonly used in conversation to mean “patents” or “patent position.” I will similarly interchange these terms here in this article.

In my experience, IP is the first issue the inventor should analyze. Why? Because so much has already been patented, or is in the patenting process, or has been published in some article, that the chances are low that your innovation is truly novel. If it is not novel, then it does not make much sense to pursue the idea and waste your resources in doing so.

But, while novelty is essential, so is being “non-obvious.” Even if it is novel, is it possibly too obvious? In other words, might another person reasonably skilled in the field of the invention think of the same idea? The patent office will take a hard look at that. However, even if you are lucky enough to get through this patenting process, there is zero guaranty that your patented idea will be important in the market. What?

Think of it this way. People are supposed to somehow benefit from innovations. I mean, that is the purpose behind introducing new discoveries and inventions—to help folks in ways not previously available. Bringing these innovations to market typically requires significant amounts of money, from a few million, to a hundred million dollars and more.

Startups are only able to raise the funding they need because their investors believe they can make more money with them than through some other investment. And the investors need to believe that their startup can offer people something that no one else can. Investors like to know their money is “protected” by one or more strong patents.

Except, it is not that simple.

Selected patents, despite the fact that they do not infringe one another—in other words, they are each novel and non-obvious in the eyes of the patent office—can ultimately offer the exact same benefit to the customer.

What am I saying?

For the sake of this article, I’ll offer an example in my field—biotech. Think, for a moment, about a bit of an abstruse subject: stem cell and growth factor patents. Consider how a non-healing bone break might be treated three different ways.

First, maybe stem cells harvested from bone marrow (let’s represent this as “patent A”) could be implanted. Second, perhaps fat tissue derived stem cells (represented by “patent B”) might be considered. Third, maybe a bone growth protein (“patent C”) would be another approach.

Surprisingly, all of these alternatives may result in the same improvement for the patient. Yet, patents A, B and C do not infringe one another. So, what were the investors for each company thinking?

Maybe the startup company behind patent A was earlier than B and had initial success with a particular kind of tissue healing; perhaps investors did not expect B or C to come along.

On the other hand, maybe the collecting of stem cells from people under patent B is less costly, less painful and less invasive than what has to happen under patent A.

Investors in patent C would surely be enamored with this protein’s ability to be synthesized in a lab, rather than harvested from donor tissue, and then expanded to large production quantities.

So, what drives the value of the patent is not the patent claims per se, but rather the competitive advantage enabled by those claims.

If A, B, and C offer similar patient benefits (which in my example, they do) than other compelling factors must exist: less invasive and painful availability, ease of production, and lower costs are all important distinguishing factors. And they could be very meaningful to investors.

This should be your challenge, too. For your potentially patentable idea, set out to find your competitive advantages—those things which will be important to the people using it—and then craft your patent to protect these things.

But, this begs the question, is your innovation so compelling that people will stop using their current solutions to the problem and adopt your product? I’ll look more at that in the next article.

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