Monetizing Ideas What Inventors should know about making money from patents Shmuel Ur ur-innovation.com

My background Master Inventor in IBM for 11 years Have about 50 granted patents Have about 150 filed patents Sold 47 ideas Own 7 patent families – sold one Invent for companies in many domains Help companies with patent strategy –NOT a patent attorney

Agenda What inventors should know about patents –True also for people in start-ups –Don’t make mistakes that I did… Patent strategy Options for monetizing ideas

A patent is: New and Useful A process, apparatus, Article of manufacture, Composition of matter or improvements to them Contains an inventive step/non obvious Provides a disclosure enabling other people to use the invention About 250,000 granted a year in the US

Correct naming of inventors Inventors are the ones who conceived the inventions –People who reduce to practice are not inventors –Managers are not inventors Having the wrong inventors can invalidate patents –If done by mistake can be corrected Inventor is someone who made a conceptual contribution to a claim –Than he is an inventor to the entire patent

Inventorship and ownership are separate issues Application of the patent must be in the name of the actual inventors –The question is who contributed to the conception of the claims Ownership is who legally owns the patent Does your employer own your patent? –Depends on the country and employment contract

Owners contract Make sure the contract discusses –Who pays the expanses – Ability to sell the patent –Ability to grant an exclusive license –One party who makes the enforcement decisions –Ability to enforce the patent –How money made is shared

Patent body is important Large body is generally better due to continuations –Explain every way you can think of of implementing the idea –This will later be very useful –Claim only what you want to claim now (or can afford) But - anything you say can and will be used against you –Avoid narrowing the embodiment The Invention is Should be made from X Must have …

Claims are the patent What is infringed is the claims, not the descriptions Having many independent claims is generally useful, makes it harder to get around –More claims cause a higher fee Claims must be supported by the description –Scope of claims larger then the enablement is a problem Claims should be concise –Interpretation depends on the description –Interpretation can depend on the case history

Have both narrow and broad claims Broad claims are very hard to go around –You may get them if you are the first –Easier to invalidate, harder to pass by the patent office –May foresee implementation you have not considered Narrow claims are hard to invalidate –If well written may be hard to go around –In chemical industry the drug you create is the most valuable claim

Infringing a patent An infringement is defined as the unauthorized making, using, selling, importing or otherwise any product or process A party directly infringes when they themselves “perform or use each and every step or element of a claimed method or product.” –Werner-Jenkinson Corp. v. Hilton Davis Corp., 520 U.S. 17 (1997) Sometimes it is possible that two parties will jointly infringe the patented invention while both are not infringing individually! – the question is does one control the other Most patents are not litigation ready!!!

Provisional Application A provisional application is a legal document that establishes an early filing date, but which does not mature into an issued patent unless the applicant files a regular non-provisional patent application within one year. There is no such thing as a "provisional patent” A provisional does not require formal patent claims The use of provisional patent Applications You are invited to a meeting and brainstorming for it came up with a few ideas… Can you share them You have an idea but it will take time to figure out if you want to invest a lot in it

Continuations (patent families) A "continuation application" is pursuing additional claims to an invention disclosed in a parent application that has not yet been issued or abandoned Continuation uses the same specification as the pending parent application, claims the priority based on the filing date of the parent, and must name at least one of the inventors named in the parent application Continuation is the reason a good body is so important for a parent patent, you can claim later exactly your competitor product…

Fast Track Patents – Track one Cost 2000$ Some limitation on patent (# of claims) Can get a patent in a year This is US – other places have similar options Good signal to investors

Patents are an offensive weapon Having a patent does not give you a right to produce something –What can you actually do with a patent? Think not on what you have done but –On what others will want to do –What should be done given time and resources –Insights that you learned that are valuable

Where should you file Present and Future Countries of: –Manufacturing –Distribution or Sale –Use –Competitors –Licensees You can delay costs using PCT- Patent Cooperation Treaty - by delaying national phase

You have an idea – what are your options? First search –Is it new? –Is it patentable? –Are you the owner? –How valuable do you think it is? –Does it stand on its own or is it a feature? Sell the idea to companies that buy ideas Sell the idea to a company that may use this idea –Do you file a patent first? A provisional? NDA? File a patent and sell it later Create a company based on the idea

A new market for ideas exist Some of what I do for a living now Companies buy ideas –Intellectual Ventures and a few others –Lowest risk, lowest gain –Payment about 10K$ + 15% of future value Description is a few page –Less worried about protecting the idea Warning – most companies who “help” inventors actually live off inventors, and most patents are worthless - USPTO Launches Media Campaign to Counter Patent Scam Artists “ Every year invention promotion scams cost U.S. inventors an estimated $200 million.”

Selling an idea to a company who, you think, needs it Assume you have an idea and a buyer in mind –“This idea could make Nokia millions…” Options before showing the idea to Nokia –Sign an NDA –File a provisional –File a patent –Hope for the best What value can you expect? I tried a few times but was never successful –Others have though…

Writing a patent and selling it later The simplest option Do expect to spend 30-50K$ –Depends on how many places you need it filed in –And it will take 3-5 years If you did your search correctly about 50% probability of the patent being granted –The problem is getting a broad patent Good market exist today –Sell it in the market

Statistics are against the smaller inventors

Company Patent Strategy Company goal –Keep other companies away – owning your market –Having access to the technology of other companies –Getting money from the patents –Increasing share value –Getting funded Different patents are used for different goals…

Strategic patent planning Decide on a business goal Create the patents to support the goal –Have specific brainstorming with the goal in mind Make sure the patent lawyer is aware of the goal If your goal is to protect something – put a fence around it –And evaluate the quality of that fence…

Importance of patents to Start-Ups Having filed at least one patent application reduces the time to the first VC investment by 76%. Ventures with higher patent quality receive VC faster –“To Be Financed or Not … - The Role of Patents for Venture Capital Financing” by Carolin Haeussler, Dietmar Harhoff and Elisabeth Müller A company with a patent will get more money from VC‘s about 7M and from 35% more VC funds A company with a patent has significantly more likelihood to IPO 32 vs. 7 and more likely not to bankrupt 6 to 14 –"the information role of patents in venture capital financing"