Don’t Give Away the Farm:
Key steps to protect and profit from your IP
By: ADONIS A. NEBLETT & TODD A. TAYLOR
February 2009
The strength of your intellectual property (IP) position and the patents in your portfolio are factors that significantly affect investor confidence. For an early-stage biomass technology company, it is essential that you purposefully implement a “best practices” patent strategy if you hope to compete for investor funds in increasingly difficult economic times. What follow are some of the “best practices” you will want to put in place to demonstrate to prospective investors that you have knowledge of your technology field and have taken the necessary steps to secure and preserve your IP rights and justify their investment.
No Disclosure Without a Confidentiality Agreement
Your R&D team has worked hard on promising technological developments and you are understandably eager to talk about those developments with peers, advisors, and experts in the field. However, a disclosure of your inventive concepts made without a confidentiality agreement in place is a public disclosure and could jeopardize future patent protection. This includes written and oral disclosures, as well as tours of your facility or lab. In the United States, you have one year from the date of that disclosure in which to file for patent protection. If you inadvertently publicly disclose your idea too early, you may have to accelerate your patent filing schedule, perhaps in advance of having fully developed your technology and in advance of securing sufficient funding needed to cover patent preparation and filing costs and still continue advancing your R&D efforts. In most countries that same unprotected disclosure will become prior art effect against your future patent application based on the publicly disclosed invention and, worse yet, it can completely eliminate any possibility of getting a patent in many foreign countries.
In addition to controlling access to your facility or lab, make sure that you have standard form confidentiality agreements on hand for visitors to sign before viewing sensitive areas or discussing your developments. You will want your service contracts and other agreements to also include confidentiality provisions. For ease of access, maintain a file with copies of the signed agreements. If they won’t sign, you should not give them access to confidential information or you should consider finding other, more agreeable, partners. Potential investors are going to want to know that all disclosures you have made are covered by a confidentiality agreement and their attorneys will want to see the signed documents.
Own Your IP
Just because you hire and pay someone as an employee, contractor, board member, consultant, or advisor, your company does not automatically own the rights in the technology or the inventions they create or help develop. In the absence of a written agreement to the contrary, you could find that those individuals or companies share ownership rights in what you thought was exclusively your company’s IP or that they actually own the IP and not your company. How do you avoid such a situation? Make sure that your employment, service, and other agreements with all individuals and entities (employees, board members, service providers, etc.) working in any capacity for your company contain language affirming company ownership of all IP (at least relating to the company’s technology focus) that they help develop and obligating them to both assign the IP to your company and help obtain patents covering the IP. If you cannot document that you own the IP, your company represents an unattractively high-risk investment, a risk that is probably too high for most potential investors.
Strategically Patent Commercial Aspects of Your Technology
The biomass industry is a sector experiencing an incredible rate of scientific and technological advancement. While all progress is welcome in this industry, not all developments and inventions, even if patented, will be the basis of commercially viable products and processes. Your R&D team may come up with many exciting developments and you may want to pursue patent protection for them all. A large patent portfolio can be a strong demonstration of your commitment and belief in your technology. But investors make investments to make money, so if your patents don’t have viable commercialization prospects, investors will walk away. When investors are performing due diligence on your patent portfolio, they will be investigating whether your portfolio provides protection of features and aspects of your invention that will provide competitive advantage and that covers what is likely to be in the commercial product or process. It is critical that you work with your technical and business teams and your patent attorneys before going to investors, to do an internal review of your portfolio and your commercialization plan and, if necessary, work to fill in any gaps that are identified. Think like a venture capitalist!
A patent is not just a certificate; it is a business tool and asset that can provide the competitive advantage and protection that investors find attractive when assessing the risks and prospects for return on their investments. Patents should not be treated like an end in themselves, but rather a means to an end…an end that can mean great business success.
Takeaway
The strength of your intellectual property (IP) position and the patents in your portfolio are factors that significantly affect investor confidence.