Lesson: Startup IP with Jack Russo

Step #3 Patent: The poor man’s patent

Keep your invention secret. Certainly go as long as possible getting as many as you can, nondisclosure and confidentiality agreements. But file a provisional patent application which keeps it secret. You don't have to then act on that for a year. If you decide in the meantime that there's a way to do business without getting patents, because patents are very expensive, and expensive in ways beyond just the legal fees, there are all these maintenance fees that have to be paid to keep them up to date, and so you spend a lot of money in something that may or may not turn out to be successful.

Fifty percent of what is currently issued as software patents are now invalid. So add up all the legal fees that were spent and all the time that was spent by the people writing those patents, the original entrepreneurs. As an entrepreneur, you have to think about, because you always have limited resources, you never have unlimited time. You usually don't have enough money. Every $1,000 you spend on legal is $1,000 that you're not spending on marketing or $1,000 you're not spending on customer development. How do you decide where to spend that money?

So I say do the minimalist approach and then six months into the effort, decide if it's worthwhile. There are some lawyers that even go further and say, file multiple provisional applications and do it yourself. Read a book like, Nolo Press "How to Patent Yourself,” because it's all an online process now in the PTO. And you can take, and some people have taken even collections of slides, collections of screens. The trick is you've got to do it within a year of the day you start commercializing. So the minute you go live, you start that one year clock. You only get a one year grace period in the U.S.

So what they do is get every last bit of technical documentation, slides, storyboards, and screenshots. Let's pretend that's 100 pages of material. Submit it electronically to the patent office with a cover sheet saying it's a provisional patent and let it sit there, and in all your investor presentations, you can validly say, "Patent Pending.” It's a poor man's approach, but the good news is if you have investors, and sometimes you will that really want patents, because they're thinking, "Well if this investment fails, maybe I'll recover with my preferred stock through these patents. Maybe there will be some vestige of something that I can possibly get some of my money back on." Negative thinking, not really the way an investor should think, but the way they do think.

When you look at intellectual property, it's like a seashore. The waves come in and the waves go, and there's a high water mark and a low water mark, and right now we're kind of at the low water mark for software patents. Alice versus CLS is kind of low tide, but at the same time, the Supreme Court decided this Aereo case which is very broad copyright protection for copyrighted works, so you can say it is kind of a high tide for copyright. And so sometimes what the Supreme Court takes away from one area of IP, they give back in another. And the practitioner who's really thinking about this stuff should advise a startup about how to surf these waves in a way that maximizes protection.

But file the provisional, because you have all the material. It's all done. It doesn't get read by anyone. A date stamp gets put on it and it's locked in some electronic repository. You can keep it secret by never prosecuting, and you have it there in case within the next 364 days after you file it, someone wants to do something with it. So it's probably worth doing just as a backup measure, and for most entrepreneurs, that's fundamentally what they do.