Should You File a Patent Application?

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Patents grant the exclusive right to make, use, and sell an invention, and an inventor can gain this monopoly-like right only by filing a patent application. In addition, even before a patent is granted, a patent application gives you the right to claim patent pending status, which is useful in marketing an invention and selling your product or company to investors.

What is a patent application?

A patent application is an application that is filed with the U.S. Patent and Trademark Office ("USPTO") requesting that patent rights be granted on an invention. When people refer to a patent application, they are usually referring to a utility patent application, although there are also design and plant patents. Utility patent applications are sometimes called "non-provisional" patent applications to distinguish them from provisional patent applications (see Should you file a provisional patent application? for more information on provisional applications).

The requirements for a patent application are described in detail in Bitlaw's legal description of patent applications. They are quite expensive, frequently costing between $8,000 and $14,000 just to draft the application, and around $15,000 to $20,000 total if you budget a reasonable amount to convince the patent office to grant the application (see How much does a Patent Application Cost? for more info). In addition to being expensive, they are also quite slow, with an application frequently taking more than two or three years before being granted. But patents are only granted after a patent application is filed, and patents are the only effective way to prevent others from using an invention, as is explained below.

Patents Create a Monopoly Right to the Invention

There are
			many reasons to file for patent protection on an invention

As explained in Bitlaw, an issued patent creates exclusive rights in any products or services covered by the patent. This means that the patent owner has the right to prevent anyone else from making, using, selling, or importing the covered invention. This can be called a "monopoly" right, but some might object to this description. A patent is a monopoly in the sense that the government is granting an enforceable right to one party (the inventor) with respect to the invention. A patent is not a "monopoly" in the sense meant by anti-trust laws. Regardless, this right can be extremely valuable. Some patent infringement lawsuits result in damages exceeding $100 million.

For small companies, it is unlikely that a hundred-million-dollar verdict will issue on one of your patents. Nonetheless, an issued patent should stop a competitor from competing against you in a manner that infringes on your patent. As a result, you will have a better chance to succeed in the marketplace even if you never successfully sue anyone for patent infringement.

What if you Cannot Afford to Enforce Your Patent Rights?

A patent infringement lawsuit can cost millions of dollars to bring to trial. This is true whether you are the patent owner or the party who allegedly infringes the patent. Frequently, clients will ask us whether patents have any value if small companies and individuals cannot afford the cost of a patent infringement lawsuit.

One important aspect of this issue is that both patent owners and infringers need to worry about the cost of a lawsuit. If you have a legitimate claim of patent infringement, the alleged infringer will be looking at whether or not they should spend millions of dollars defending a patent lawsuit that they might lose. A loss means that they would be obligated to pay their own attorney's fees, damages to the patent owners (which could be tripled depending on the circumstances), and perhaps even be responsible for paying the patent owner's attorney's fees. A competitor facing these consequences has a strong incentive to: i) avoid infringing the patent in the first place, and ii) settle with the patent owner once a lawsuit is initiated. If the competitor simply avoids infringement, the patent owner has obtained a substantial benefit without any enforcement costs. If the competitor is willing to settle early in the lawsuit, then the cost for enforcing the patent will be much less than if the lawsuit proceeded to trial.

Because the damages in patent lawsuits are frequently substantial, some attorneys routinely represent patent owners on a contingency basis. This means that the attorneys will forgo most or all of their usual attorneys' fees in return for a percentage of any revenue received through trial verdicts and settlements. While contingency lawsuits still cost the patent owners (they will typically at least pay for expenses during the lawsuit), this is a much cheaper way to enforce a patent. Patent owners should know, however, that attorneys are very selective about the type of patent representations that they accept on a contingency basis.

Finally, a valid patent that is being infringed has tremendous value even if the patent owner cannot afford to enforce the patent. As a type of intellectual property, a patent that is being infringed can frequently be sold to a third party (or even to the allegedly infringing party) for a substantial amount.

Benefits of Patent Pending

In addition to the rights obtained once a patent issues, the mere filing of a patent application allows the applicant to declare that the invention is "patent pending." No legal rights are granted as part of the "patent pending" status, so you may not sue anyone for infringing your pending patent application. However, there are significant advantages to an inventor that arise upon filing a patent that are not related to having an issued patent.

Benefits: Competitive Deterrence

While a pending patent application does not give any rights to exclude others from making your invention, a pending application may deter a competitor from making or otherwise implementing your invention. If you are the first to market a particular invention, and you are successful, potential competitors will become aware of your activities. They will review your products, examine your web pages, and look at your marketing materials. If you prominently indicate that you have applied for patent protection, a competitor may choose not to copy your product or approach. Copycat implementations would mean that if you were to ever obtain a patent on your product, they would likely infringe on that patent. Because this would leave them open to an expensive lawsuit and potential damages, it makes business sense to avoid expensive, future issues by not copying your product in the present, even if you have no legal right to stop such copying before your patent issues. In other words, the simple act of explaining that you have a patent pending on your invention can deter competitors from copying your invention.

Benefits: Marketing

Many companies take great pride in the fact that their products and services are so unique that they are subject to pending patent applications. The "patent pending" label becomes a high-tech version of "new and improved," and plays a large role in marketing products and services. These benefits remain as long as a patent application is pending on the product or service. You may not claim patent pending for any product that is not covered by the claims of the patent application, or for any time period when the patent application is no longer pending. See 35 U.S.C. 292

Benefits: Investors

Forsgren Fisher McCalmont DeMarea Tysver routinely works with small companies that rely on angel investors and venture funds to provide capital to develop and improve their products. These investors will frequently "strongly suggest" that their client companies do everything possible to protect their intellectual property. The filing of one or more patent applications on a new product may appease its investors and might make companies more attractive when seeking additional funding. This is true even though none of these patent applications have developed into an issued patent.

Benefits: Acquiring Companies

When selling a patent, a product line, or even the entire company, it is usually important that the selling company has strong, issued patents. In many cases, it is equally or more important that the selling company has pending patent applications as well. Acquiring companies will frequently approach patent applications from a different perspective than the original inventing company, and will strongly desire a pending application that they can take over and amend as desired. In many cases, a non-issued but pending application can be as valuable to the acquiring company as the issued patent itself.

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This guidance is provided by the attorneys of Forsgren Fisher McCalmont DeMarea Tysver. Please contact us if you need help protecting your intellectual property. The legal information provided in this guidance should be distinguished from actual legal advice. Please see the Guidance index page for more information.