Using Intellectual Property as Differentiators for Small Businesses

Early stage companies and small businesses often have similar concerns to overcome. For example, an early stage company, such as a technology company, and a long-standing small business are each concurrently challenged to generate new revenue, differentiate themselves in the marketplace, and head off challenges from competitors. However, such companies do not have large budgets for business development and marketing in comparison with bigger firms, yet these companies need to continue to create new products and services with innovative elements just to continue to survive. These innovative elements can be differentiators and companies should leverage these differentiators in various ways to help overcome the challenges described above. These innovative elements may form the basis for intellectual property assets and protecting this intellectual property portfolio may empower the business in several ways toward meeting the challenges.

Patents can be used to protect inventive concepts, be they related to functionality or ornamental appearance. The first step in obtaining patent protection is filing a patent application. In the United States, an inventor or the business needs to file an application with the United States Patent and Trademark Office, where the application includes a detailed description of the invention. The level of required detail in the description is that necessary for a person “of ordinary skill in the art” to replicate the invention. In order to facilitate the process and not to wait for market entry, a company can file a “Provisional” patent application, which is a simplified application giving applicants a year to file a formal, complete application. Upon filing a Provisional patent application, the filer can immediately use the term “Patent Pending” and rights are preserved.

Even if you already launched a product and would like to prevent competitors from entering a market segment, you can obtain patent protection in the United States, so long as the application is filed no more than one year from the invention’s initial disclosure to the public. However, this one year grace period is usually not available in other countries. So to protect non-U.S. rights, it is always best for entrepreneurs to file a patent application before public disclosure.

The Patent Office performs a search of applicable references and also examines the application against those and possibly other references. In order to ultimately obtain patent protection, the invention must meet several requirements, including that the invention is novel and “not obvious” over prior inventions. If the patent is granted, its term runs for about 20 years and allows the holder of the patent to preclude others from practicing the invention.

Innovation can also relate to a product’s appearance. If the appearance of a product is distinctive, companies may be interested in protecting that appearance and create another company asset. Design patents protect can be used to protect the ornamental appearance of a physical product, such as an appliance or a shoe for a period of about 15 years. Similar to utility patents described above, design patents require adequately descriptive drawings for disclosing the invention.

The United States is a subscriber to patent treaties with most countries around the world. Through these treaties, any patent filing in one country is recognized in most other countries. Consequently, filing a patent application in the United States before public disclosure preserves rights in other countries.

Certainly names and logos can be marketplace differentiators as well. Trademark law covers this form of intellectual property. Although trademarks are often thought of as limited to names or logos, other attributes can also be included, such as colors, sounds, and even three dimensional objects. While trademark rights accrue with use, and trademark registration can be applied for in individual states, it is often a good idea to apply for Federal trademark registration, which covers all fifty states. It can be helpful to think of trademarks as being those names, logos, etc. which the public associates with a particular company, product, or service.

Young companies are often concerned about disclosure of their concepts. Importantly, under ordinary circumstances and unless an applicant takes certain steps, patent applications are only published 18 months after the initial filing. Until that time, the application remains unpublished and out of public view.

Patents and patent applications alone often increase market capitalization, especially if the concept is breakthrough in the industry and is a differentiator. These intellectual property often result in increased market capitalization by being assets which affix value to a company. The Intellectual Property also can be licensed, thereby increasing revenue (at comparatively low cost). Patents also can be used defensively. For example, if another company asserts their patents, the small business can use their patents and applications in negotiation.

They also can be used as collateral as the need for debt financing arises.

It is always a good idea for small and emerging businesses to consult with a patent attorney to determine how best to capture a concept and preserve rights for it.