How do you protect your IP?
In the US, a single patent covers the whole of the US. A US patent is granted by the federal US Patent and Trademark Office (USPTO) but enforced by any district court which considers its use across the whole of the US. Since 2013, the US operates on a ‘first-to-file’ system.
In IP litigation there is little likelihood of a ‘loser pays’ judgement, so US IP litigation costs can become expensive quickly. Do your research up front to understand the patent landscape. Market entrants are unlikely to be targets for ‘patent trolls,’ who typically go after larger companies. Instead, competitors may use patents to stop a new entrant from gaining a foothold.
What to put in place
Assessing the level of risk associated with moving to the US is best achieved with a specialist IP advisor.
Whenever filing for IP in Europe you should consider a US filing, at least for the main inventions.
• Have you completed an IP review for any new product launches?
• Have you considered IP insurance, especially if a risk audit highlighted IP as a key risk? • Have you translated employee IP invention clauses into US contracts properly?
• Do you have a dedicated IP champion?
• Do you have a well-documented Trade Secrets policy?
How the US is different from Europe
The main ways in which the US market differs include:
• The US market is half the size of the EU, but a single patent covers the whole of the US rather than several national patents in Europe;
• A US patent is granted by the federal USPTO (uspto.gov), but enforced by any district court which considers use across the whole of the US; and
• IP litigants each cover their own costs in the US. There is very little likelihood of a ‘loser pays’ judgment. This is a stark contrast to the EU and, with US litigation costs being so high, avoiding litigation is a sound strategy.
The investor’s perspective
Not all businesses are created equal when it comes to IP. It is important for founders to be clear about the role IP plays within their business, both with themselves and with their prospective investors. For some companies, IP will be core to the strategy and a primary reason why the business was founded in the first place: for example, to commercialize a unique invention incubated by professors at a world class university. For other companies, it will be an asset, but one of many held by the business.
The IP position of your business is very unlikely to be the reason an investor will not invest in your business – they may make it a term of the investment to put some of the funding towards progressing a patent grant process or engaging suitable attorneys but would rarely walk away altogether.
In discussing the investor’s perspective on IP, we discovered the following:
• IP is a valuable asset which, ideally, is fully protectable and defensible, creating a barrier to entry for other competitors.
• In diligence, there should be no red flags in relation to potential infringements of others’ IP nor should there be a credible risk of infringement claims being made by others against the IP of your business.
• Investors understand that generating and securing IP (particularly patents) can take a great deal of time and money and divert attention from executing on business strategy.
• Spending vast amounts of time and money on your IP portfolio is unlikely to make sense before a Series A fundraise.
• An equity investor is not a bank and is not looking to protect its downside by neatly packaging up your IP for a sale, should the business start failing.
Specialists in the field
US Patent Attorneys:
Jon Calvert – Clearview IP
Melissa Gato – Shoff Darby Insurance Company
David L. Cohen – Kidon IP Corporation
UK Patent Attorneys:
Chris Tunstall – Carpmaels & Ransford
Ian Armstrong – HGF
Clare Cornell – Finnegan
Peter Langley – Origin