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Common Factors in the Decision to File a Patent Application

When working with an inventor or  startup, a frequent question is whether it is prudent to proceed with a patent application. More often than not, I am not in a position to concisely answer the question, as the question may hinge more on economics than intellectual property. A patent search may shed some light on the prudence of moving forward from an intellectual property standpoint, but it doesn’t help answer whether the cost and effort involved in a patent application are worth it. For people at some large business entities or educational institutions, the value may be easier to determine. Moving forward with the process may increase that person’s salary or credibility. For an individual inventor, startup, or small business, the choice is not that simple.

For the startup or individual inventor, a patent should be thought of as an asset. The goal for a patent application should not be a certificate to hang from the wall. In other words, what will moving forward do for your business. You purchased a computer to easily enter, store, search, and communicate data (reducing labor and storage expense). You purchased hosting services for your website to inform others of your product or service (increase revenue) and to enhance your other marketing efforts (reduce expense). You worked with a product designer to optimize the experience of your product for your customers (increase revenue). Even though you probably did not formally analyze purchases for the above, you at least made a “gut level” feel as to how the purchases were beneficial.

There are several formal methods of patent valuation, such as the cost approach, the market approach, and the income approach (the dominant approach for intellectual property). Typically, those approaches may require the expense and effort equal to the cost of moving forward in the patent process. Thus they may not be suitable at this stage of the process. Some questions that might give a “gut level” feel as to whether to move forward to not include:

  • How does your idea help increase revenue or decrease expense?
  • Will a patent application help investors better understand and evaluate the concept?
  • Is the idea in a new field of technology?
  • Is your idea operable only as an improvement to another product or can it be sold independently as a complete product?
  • How large is the total market for your idea (or a related market)?
  • What percentage of the market can your idea help you gain?
  • How many related products exist as your competition?
  • How fast is the industry changing?
  • What are the alternatives to your idea?
  • How much does it cost to manufacture your product?
  • Is the idea in a growing, stable, or declining industry?

Those questions may not lead to a definitive answers,  but they should provide guidance on the decision as to whether to proceed towards a patent. When you made the decision to purchase (or not purchase) a computer, hosting services, or other products and services, you analyzed how it would help your business. You should do the same in deciding to move forward in the patenting process.

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