Before market
How to secure assets with hefty sales potential
by Craig Kotilinek Everyone has had that “million-dollar idea.” At least, most people have felt like they have. But many small-business owners don’t realize the value of their intellectual property. Upsize talked to local patent attorney Mark Litman, of Mark A. Litman & Associates in Edina, to cover the basics.
Upsize: Why are patents so important to small-business owners?
Mark Litman: This comes down to the basic business benefit of a patent. If you are a small company and you come out with a significant product and you have a patent, no one else can sell an equivalent product.
Upsize: Do you know of a specific instance where a company did not secure a patent and should have?
Litman: A good example is in the area of magnetic tape. There was one worldwide leader that did not aggressively protect their intellectual property. Now they no longer manufacture tape. A company that was a worldwide leader in that industry completely lost their position because of a failure to maintain an active intellectual property program.
Upsize: When someone has an idea, what would the first step to securing a patent be?
Litman: You could come to a patent attorney to begin with, or you could initiate the work that the patent attorney would do by going to the Patent and Trademark Office’s Web site at www.uspto.gov. You could then do a search of the patents to see if there has already been a patent on your product. You can also go into the trade literature for that industry and see what has been published in that area.
Upsize: What do I need to know before I file for a patent?
Litman: The main thing to know about a patent is that it has to cover technology that is new, useful and not obvious from existing technology. Another thing is that you should only get a patent if it helps you in a business sense. You should patent technology that you really expect to take to the marketplace.
Upsize: Do you get a lot of people who are looking for trophies to put on their walls?
Litman: I get enough people that I make it one of my initial points.
Upsize: How much does it cost to get a patent?
Litman: Examination fees by the U.S. Patent and Trade Association can run you anywhere from about $1,000 for the minimum filing and issue fees, to about $3,000 if other procedures come into play. Small-business entities are charged less than corporations by about 50 percent. The fee of $1,000 is based on a small entity fee and it’s a fixed cost that can’t be avoided.
The other additional cost is the attorney’s time. About the absolute minimum I can bill for a simple patent application, including drawings and other things, is about $2,000. The midrange for a patent application for meaningful technology is probably about $10,000.
After you get your patent, there are also maintenance fees that are required to be paid to the patent office after 3.5 years, 7.5 years, and 11.5 years. They run about $2,000 to $2,500 total for the three separate payments. When you get a patent, it is usually a patent in a country, and is only enforceable in that country.
Upsize: How abstract can an idea be?
Litman: Well, you no longer need a working model of the technology that you are seeking a patent on. However, a patent application is a legal document, and has certain definitive legal requirements in it. One of those requirements is that the description you provide in the application enables one of ordinary skill in the art to make and use the invention as claimed.
Upsize: How long does the patent process take?
Litman: In most areas of technology, you can expect first action from the Patent Office in less than 18 months. The entire process, up to the issuance of a patent, on average, probably takes 2 to 2.5 years; sometimes shorter, more often longer. You put patent pending on your product during this process. You can always manufacture once the patent application is on file, but the patent pending offers a general warning that patent protection is being issued on that product.
Upsize: So a small business wouldn’t end up having to wait the 2 years?
Litman: Correct. Once you have the patent application on file, you are protected against actions of others in either filing their own patent applications, or in doing something that would prevent you from getting a patent.
Upsize: What could prevent you from getting a patent?
Litman: For example, if someone else sold a product before you file the patent application. That would immediately cause you to lose your rights throughout the world, except for possibly the United States. The U.S. allows you to sell a product and then file an application within one year.
Upsize: What are some common misconceptions surrounding patents?
Litman: One significant misconception is the fact that when you get a patent, it doesn’t necessarily mean that you will be able to sell that product. For example, if there were a basic patent on flat screen, you would have to get a license from the owner of that patent in order for you to make an improvement. A patent gives you the right to exclude others from what you have patented; it doesn’t always give you the right to make the product that you have a patent on. You have to be aware of other people’s patents when you go out there; you can’t rely on the fact that you have a patent yourself.
Upsize: Are many licenses given?
Litman: Yes. Lots of people give licenses. They get money and don’t have to put any capital investment in. There are a number of companies and individuals that have made significant amounts of money without ever having produced a product.
Upsize: Does having patent protection help in getting investors?
Litman: You need to file for a patent first. One of the first things they are going to ask you is, ‘What kind of IP protection do you have?’ No one is going to invest in a product when they know someone else is just going to knock it off.
Upsize: Would investors put up money for something that is only in the negotiation stage with a patent attorney?
Litman: They would put up money to assist in paying for intellectual property protection. However, when you disclose the technology, even to your investors, you would need a confidentiality agreement in place so your disclosure to them does not become a public disclosure.
[contact] Mark Litman is an intellectual property attorney with Mark A. Litman & Associates in Edina: 952.832.9090; malpatlaw@aol.com; www.marklitman.com
