A patent is a set of ownership rights given by a state to investors so that they have the exclusive rights to make, use and sell their own invention. Patents are given so as to prevent others from making, selling or importing the same invention.

The inventor is called the patentee and he also has to comply with other laws and regulations to use his own invention. He can only market or sell his product under regulatory approval. If his product or design is an improvement of a product that is already there in the market he has to first get license from the owner of the earlier broader patent covering the same type of product. The owner of the improved product can also have the right to exclude the patent owner from using the improvement.

Patentee’s Rights:

Now the patentee can have the right to exclude others from copying, using, selling or importing his patent product for a term of 20 years. A patent is in fact a kind of agreement between the inventor and the government where the state guards the right of the inventor from others from using or selling his invention as long as he makes the details of his invention public. This also like in any other case the property right may be sold, licensed, mortgaged, assigned or transferred, or simply given away.
How to get a patent?

To obtain a patent you must first provide a complete description of your invention in writing. This is provided with the ‘patent specification’ along with the figures showing how the invention is made and how it operates. At the end of the specification you must put forward your claims that points out specifically what you regard as your invention. This is a description unlike the body of the specification, designed to provide the public with notice of precisely what you as the patent owner has a right to exclude others from making, using, or selling. It basically defines what a patent covers or what it does not cover. There may be numerous claims for a single patent, each of which is regarded as a distinct invention. For a patent to be granted, the patent application must meet the requirements of the national law related to patentability.

Patents are enforced through civil lawsuits. A patent owner can seek monetary compensation if an accused infringer breaks any of the patents law and practices even one of the claims of the patent. He can prohibit the accused from engaging in future acts of infringement. But if the accused infringer challenges the validity of the patent owner then the court may declare the patent invalid. The grounds on which a patent can be found invalid are set out in the relevant patent legislation and vary between countries.

Moreover, a patent is a property right that gives the patent holder the right, for a limited time, to exclude others from making, using, offering to sell, selling, or importing into the United States the claimed invention in exchange for a full disclosure of the invention. In simplified terms, a patent is a way of protecting an invention (any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof).

Therefore, without a patent, anyone can legally make, use, sell or import your invention.

Note: Ideas are not patentable, but rather the knowledge of how to make and/or use the idea is patentable.

To be patentable the law specifies three primary patentability requirements wherein the subject matter of the invention must be:
• Useful – To have utility as in an invention must be capable of some beneficial use.
• Novel – The invention must be new (different from the prior art) and an invention is not new if it has been described in a printed publication, known or used by others, or has been in public use or for sale. If an invention is not new, then the invention is not patentable (i.e., anticipated by the prior art).
• Non-obvious If the differences between the invention sought to be patented and the prior art (what is known) would have been obvious to a person having ordinary skill in the art then the invention is obvious and not patentable.

Example: Obvious non-patentable subject matter includes the substitution of one color for another, or changes in size or obvious changes or improvements over the prior art.

A patent ensures that your unique products and ideas are yours alone. There are certain products or ideas that are beneficial to the entire human race and therefore, a permanent patent is not granted. In these cases, a limited time period patent is granted. This way the inventor can have as much monetary benefit as possible before the product or idea becomes public domain. These limited time period patents make sure that the interests of the population and the interests of the inventor are both protected.

Patent laws are in place because it is not possible for the government to support the research to develop all kinds of products and ideas. By protecting the rights of the inventor, the government can be sure that people will continue to think of new and unique ideas to share with the world.

Patents grant the rights to these inventors to profit from the products and ideas that they created. Many times an inventor will look to corporate giants to help fund their research. Otherwise, there may not be enough monetary resources available to develop the ideas.

Products and ideas should not simply be improvements upon or repackaging of products and ideas that already exist. They need to be the original and unique creations of the inventor. Obviously, there are a few exceptions to this rule, however, generally, this is what the patent office looks for.

In order to prove that you have a unique and original product or idea, you must document every part of the creation process. This is essential if you want to obtain the rights to your creation. The more you can document, the better chance you have of being granted a patent. After all, it would be a shame if all of your hard work and ideas were refused a patent because you did not keep good documentation during the creative process. You must also make sure that a similar product does not already have a patent. The patent office is not going to grant a patent for different variations of the same product. This process can be time consuming and frustrating to the inventor, however, it is necessary to protect your invention.

Take Action. Be proactive in implementing an Intellectual Property Strategy and identifying new innovations. Do not limit activities to current products and services – look for unmet needs in related markets and develop innovative ideas in those areas as well. These developments in related markets provide opportunities for product expansion as well as licensing to generate additional revenue. Also, look for ways to extend existing products or services by identifying future needs of the marketplace. Evaluate current trends in your market and brainstorm on how to meet future customer needs as those trends evolve.

Evaluate. Review all innovations to determine how they can support the company’s current and future goals. When a new innovation is identified, quickly perform an initial analysis to identify any potential deadlines regarding protection of that innovation. Certain types of intellectual property protection have strict filing deadlines and other requirements to preserve your rights.

Existing Assets. Evaluate your existing IP assets to determine whether they are consistent with your current business plan. As your company’s business objectives change, look for new ways to leverage your existing IP assets – through licensing, marketing and so forth. Take steps to ensure that all of your company’s existing innovations are identified and, if appropriate, properly protected. It may be difficult, or impossible, to fully leverage an IP asset if it is not protected.

Review your business goals today and begin developing an Intellectual Property Strategy that supports and enhances those goals.

Confidentiality Document. An important method of protecting sensitive data involves the diligent use of a written agreement, sometimes referred to as a Confidentiality or Proprietary Information Agreement. These documents are signed by every person who has access to any confidential information of the company. People who may access this type of data include: employees, contractors, vendors, advisors, investors, board members and prospective customers. Establish a company policy that requires individuals to sign this agreement before any confidential data is disclosed.

Assignment Requirement. Additionally, employees, contractors and similar personnel should sign a written agreement to disclose all innovations, creations and related information developed as part of their employment or contractual obligation with the company. This document also requires those individuals to assign their Intellectual Property rights in any innovation to the company. The requirement to assign innovations can be included in an employment contract, assignment document, or the Confidentiality document mentioned above.

Control Access. Another method of protecting sensitive data includes controlling access to that data. For example, only those employees, contractors, advisors, or other individuals that need access to this sensitive information are given appropriate access. Be careful to keep confidential items away from public areas of the company or areas that non-employees visit regularly.

Toys

Licensing is very popular in the toy industry, because it allows toy manufacturers to come out with many new toys each year. Even toys based on popular movies and television shows are licensed from their inventors. You may see licensed toys from Batman Begins, Star Wars, Harry Potter, Spongebob Squarepants, and Shrek at your favorite department store or toy store.

Board Games

Board games from popular companies such as Hasbro are often licensed from their creators. This has several advantages for board game companies. They can introduce new games to the market more quickly than their competitors and they can also cut research and development costs since board game creators usually do their own testing and prototype development. Board game creators benefit from licensing because they are not forced to deal with marketing and distributing the games they have created. This leaves more time for creating and testing new games that can be licensed to other manufacturers in the future. Chances are that many of the board games in your home or local recreation center are licensed.

Action Figures

Action figures are usually based off of movie and television characters. Good examples are Superman, Spiderman, Batman, He-Man, and GI Joe. Most of these action figures are licensed and distributed by manufacturing companies with a wide market reach and excellent manufacturing capacity. This gives product creators the time to create new products instead of spending time figuring out how to market and distribute products they have already created. Product licensing also benefits action figure manufacturers. These manufacturers are able to capitalize on the popularity of movies and television shows in order to make more sales. Licensing also makes it possible for manufacturers to introduce these action figures without having to spend a lot of money on testing and developing the products in house.

Video Games

Video game manufacturers also take advantage of licensing when creating video games for the child and adult gaming markets. It is much easier to sell video games when they contain recognizable characters from movies, television shows, comics, and cartoons, so video game manufacturers will often license popular characters and use them in new video game offerings. This gives the manufacturer an edge in marketing and selling their new video games to both children and adults. Licensed products are all around us in the marketplace and provide excellent forms of education and entertainment. The best part about these licensed products is that everyone involved wins. Creators are compensated for their products, manufacturers are able to cut costs and remain competitive, and end users are able to continue buying new products for entertainment and educational purposes.

According to some conversations I’ve had with people in the VC industry, the statistics above don’t tell the full picture. In addition to half of the venture funded companies that fail, there are those that are described as the “walking dead” – companies that neither go out of business, nor ever provide the substantial returns needed to satisfy typical VC models. One panelist I saw at a venture conference last year suggested that for their financial model to make sense, they needed at least 1 out of 10 companies to provide a 20x return on their investment. This could be especially troubling for the industry, given the emerging trend towards fewer and lower valued liquidity events.

But what if a venture fund could extract incremental investment returns from their portfolio companies, including the failed companies and from the so-called walking-dead companies? I believe a comprehensive cross-portfolio IP management strategy could provide increased returns to venture investors.

IP Due Diligence to Lower Business Risk

VC’s typically invest in companies at the earliest stages of their respective life cycles. At the point of making the investment decision, the venture capitalist is placing his or her bet on the business idea, the management team; and whether they know it or not, they are also placing a bet on the IP which underpins the business.

IP Portfolio Management to Lower Costs & Increase Margins

Although most of the portfolio companies financed by a given venture fund will be relatively small, and have a relatively small portfolio of patents, it may be worth it for the VC to look across the entire IP portfolio in aggregate.

I did a quick analysis of a couple regional VC firms – with relatively small portfolio’s of companies, these firms had an invested interest in over 300 and 600 patents. By corporate standards, these are sizeable portfolios. I would expect to find even larger portfolios with larger venture firms.

In businesses with portfolios of this magnitude, it is important to understand the portfolio in multiple dimensions. For example, IP professionals, marketers and business leaders want to know what IP assets support which products. Knowledge of these relationships can allow a company to block competitors, lower costs, raise margins and ultimately increase returns to investors. In addition, they will want to categorize their patents by the markets and technology areas they serve, as it helps them understand if their patents align with the business focus.

Bringing this discipline to IP Portfolio management has the added benefit of revealing patents that are not core to the business of the company. With this knowledge in hand, a typical company will seek to lower costs by letting patents expire, or they may seek to sell or out-license their non-core patents, thus creating a new source of revenue.

IP Licensing to Increase Returns

Patents that are not core to the business of the owning company may still be valuable to other companies and other industries. There are some well-known examples of companies who have been able to generate significant revenues from their non-core patents through active licensing programs — Companies like IBM and Qualcomm come to mind. However there are a number of other companies that have generated significant returns by monetizing their non-core IP assets.

In the case of a VC portfolio of companies, each company may only have a small number of non-core patents. But across the portfolio of companies, the venture firm may have rights to a significant number of patents that may be valuable to other companies/industries.

We can extend the concept of monetizing non-core assets of the top companies in the venture portfolio to the “walking-dead” and even the defunct portfolio companies (although with these latter two groups, we may worry less about the distinction between core and non-core patents). In many cases, the business model and the due diligence supporting the original investment in these were probably sound, but the business failed due to execution or market timing issues. In many cases the underlying IP assets may still be fully valid, valuable and available for entry into a focused licensing and monetization program.

A multi-million dollar licensing revenue stream would nicely compliment the periodic liquidity events in today’s VC market.