Build a moat around your intellectual property

Entrepreneurs make mistakes — it comes with being human and building something new and different for the marketplace. What matters most is how they handle those mistakes.

Successful entrepreneurs prepare, avoid, minimize and handle mistakes. Frequently, a new founder will say he or she has intellectual property that provides a leading edge and barrier to competition. Having a pending patent or issued patent, however, isn’t the complete solution for protecting a new venture from competition and creating barriers to entry. What is more valuable is a patent strategy.

Patent strategy

As a startup continues to develop its product(s) or service, founders should consider each new feature as a possibility for patent protection. Startups that file one early patent application will find that the product moves in iterations far beyond the original application. Thus, the product becomes under-protected or not covered at all. If the product evolves quickly, companies can file a provisional patent application or a series of them.

Critical to building a patent strategy is finding a law firm with experienced patent attorneys. Patents are riddled with nuances, legal terminology and the laborious process for determining prior art. An effective IP strategy is just as much about market intelligence as it is about claims construction; experienced attorneys are well-equipped to perform the necessary research.

It isn’t uncommon for founders to “go cheap” and avoid hiring experienced attorneys. Big mistake. If a product or service performs well, it won’t be long before others try to get into the market.

Trade secrets and trademarks

While patents are valuable, they’re only one piece. Sometimes founders keep trade secrets in-house to avoid disclosing pertinent information in the patent publication. This is frequently practiced by software companies because publications with algorithms make it easier to “code around” to accomplish the same outcome.

However, founders sometimes opt for a trade secrets strategy over filing patents to avoid legal costs. They don’t realize the risk of weaker legal protection.

A trade secret allows you to pursue litigation with employees who leak confidential information or steal technology, but it doesn’t protect the company from competitors. On the contrary, a competitor can patent the same invention and sue the original founder for patent infringement. The U.S. patent legal system is based upon “first to file,” not “first to invent.” Founders should remember that a secret is no longer a secret once two people know about it.

Founders must also build a unique brand and protect it with registered trademarks. A trademark is a symbol, design, words or phrases that distinguish a company. It includes colors, captions, types of font and other details that lead to a unique brand.

Trademarks, like patents, must be filed with the U.S. Patent and Trademark Office. Often, founders wait too long and find there are conflicts. Trademark filings are inexpensive and shouldn’t be overlooked.

Founders spend time, money and effort building a unique company with a unique product or service. It’s best to “prepare” the company early with proper protection for the long-haul to achieve future market dominance.

 

Catherine V. Mott is the CEO and founder of BlueTree Capital Group, BlueTree Venture Fund and BlueTree Allied Angels located in Western Pennsylvania. As one of the more than 370 professional managed private investor networks in the U.S. and Canada, BlueTree Allied Angels has invested more than $27 million in 43 regional startup companies.