There are many innovative companies in the Pocono Mountain region. Many of these develop their own methods, devices and improvements on existing devices in the course of performing their functions. These businesses can reap immediate and measurable benefits by taking a few simple steps to protect their ideas with patent, trademarks, copyrights and trade secrets and other Intellectual Property (IP). Below are questions and answers relating to various ways that these small businesses can use IP to capitalize on their improvements and innovations.
“How can IP help my company?”
- provide a 20-year monopoly on your idea,
- make your products/services unique,
- allow you to charge a premium for your unique products/services,
- reduce your liability,
- protect your corporate identity,
- add considerable value (IP assets) to your balance sheet,
- allow your company leverage if cited with infringement,
- bring your company from a manufacturing company to a design and licensing company,
- bring in royalty income.
Each of the above is described in more detail below:
provide a 20-year monopoly on your idea
This is the nature of a patent. A patent prevents others from making, using, selling or importing into the United States a unique device, system or process that is covered by the claims of your patent, effectively giving you a monopoly on that specific product. These last 20 years from the filing of the patent application.
make your products/services unique
Since there cannot be products on the market which are the same as your products, yours are by definition unique.
allow you to charge a premium for your unique products/services
Since your product is unique, it can command a higher premium. There can be no equal due to the patent.
reduce your liability
IP training can be provided to your staff and employees on Intellectual Property rights and how they function. Your staff and employees will then easily recognize what they can and cannot do. This reduces the probability of copyright, patent, trademark and other types of IP infringement.
protect your corporate identity
Having an internal corporate process that requires proper use and registration of trademarks and tradenames results in a strong corporate identity that can be enforced against those trying to use similar trademarks.
add considerable value (IP assets) to your balance sheet
Properly protected trade secrets, inventions, improvements, tradenames and authored material have significant value. Many corporations indicate an estimated value for their “intangible assets” on their balance sheet. Many times, the IP portfolio is one of the most valuable assets of a company.
allow your company leverage if cited with infringement
When named as a Defendant in an infringement lawsuit, if you have IP covering at least one feature of the other Party’s products, a defense would be to assert this IP against the other Party. Your company may also have trademarks or copyrights infringed by the other Party. Any of these may be used to get some leverage in the lawsuit and allow more favorable terms.
bring your company from a manufacturing company to a design and licensing company
Since it is less difficult to make copies of devices that have been invented than to come up with the original concept, it is more common to have these ‘workshop’ type of companies than it is to have the innovative companies. Since there are many workshop companies here and in countries such as China, the fees charged by these companies are significantly less than those charged by the innovative companies. If a workshop company develops a unique process for making a product and does not protect it, it is a matter of time before the industry is using it. However, if a workshop company protects the idea, then it is only available to them. They now have the right to license it to other workshop companies for a fee. Many times, the profit margins for licensing technology exceed the profit margins for manufacturing, causing increased profits.
bring in royalty income
As indicated above, protected IP can be licensed to those in markets which you would not be able to reach. Therefore, there is no additional competition to your products, however, there is now additional income from royalties.
“What is the most cost-effective means for protecting an invention?”
File a U.S. Provisional Patent Application (which is less than half of the cost of a full US application) and you will have one year to see and gauge the public’s interest in the idea. After one year, a full US, international or foreign application must be filed. This filing strategy gives the small company a chance to meet with corporations to commercialize their idea without the risk of losing rights.
Aren’t patents only for the big companies?
On the contrary, if you have an idea and a large company likes your product and wants to make the same product, without a patent, they are free to do so. There is very little chance of your company out marketing the large company.
Does IP ownership increase a small business’s chances of being acquired?
One method is to determine how much it would cost to license the patent if you did not own it. Assuming that a typical licensing fee is 3-5% of sales, a small business making $1M in annual sales that is covered by the patent will have a value of 3% x $1M per year until the patent expires. If the small business is acquired by a larger company that now sells $100M of a product covered by the patent, the value is now 3% x $100M per year. This means that the same patent is now 100 times more valuable in the hands of this larger company. Therefore, when a large company is looking for small businesses to acquire, those with patents (a 20-year monopoly in the largest market in the world) are much more valuable due to their IP.
(Provided by Zale Patent Law, Inc. 570-878-5000, ZALELAW.COM, 310 Adams Avenue, Suite 200, Scranton, PA specializing in patent, trademark, copyright, trade secret, e-business, website, technology and related law.)