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Why Startups Need to File Patent at An Early Stage Venture Capitalists favour big investments in startups that have already filed the patents

By Baishali Mukherjee

Opinions expressed by Entrepreneur contributors are their own.

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Patents play a major role in getting funds for startups, especially the tech ventures. Venture capitalists evidently favour tech startups with patent-pending innovation. Patents increase the prospect and quality of merger, purchase or sale of a corporation or an initial public offering. This incentivizes investors to fund start-ups opting for patents. Moreover, patent portfolios are used as defensive strategies to discourage patent infringement claims.

While Applying for a Patent, Mull Over the Hazards

When decidingon applying for a patent, take a look at your invention and mull over the risks of not patenting it against the costs of doing so. The best approach is to appraise alternatives for IP protection before publicly disclosing the idea (e.g., pitch competitions, crowdfunding campaigns, launches, trade shows, etc.). Find a startup patent lawyer who understands your state of affairs and is ready to assist you in developing a patent strategy that takes care of your funding and acquisition goals.

According to VinayShraff, Advocate, Supreme Court, High Court,Tribunals, it is a chicken-and-egg quandary for startups that are cash-strapped. "While they require capital to invest in protecting the IP, the investment can secure them with more funding," informed Shraff.

Today, we have organisations and individuals who understand the hurdles faced by the startupsand have initiated many customized solutions,largely reducing the cost for filing of thepatent. They help the startups right from doing initial research till filing of the product patent.

Not Filing the Patents on Time can Put Your Innovation At Risk

Binod Singh, Founder of Einfolge Technologies Pvt Ltd, a Bangalore based companyhas been protecting the innovations of many startups and government institutions through customized solutions in patent and IPR. Singh feels there has been an increase in filings of patents by the start-ups. "While interacting with many such startups, we have noticed that a good number of them have risked their invention by not filing the patents on time," he shared.

Here are Singh's views on the advantages of filing the patent at early stage-

  1. Bolster Investor support-Venture Capitalists favourbig investments in start-ups which have already filed the patents. These give them the confidence that the innovation has got real value and potential.
  2. Early filing protects the date of first to file for any start-ups. As we know, publicizing your invention at any time before filing a patent application could put your intellectual property rights in jeopardy.
  3. Product Development boost- Getting a grant on patents gives a boost to create the product at a much-accelerated pace.Nowadays startups aim for the global market. So, how quickly you go to the market is very important. Startups need to be aggressive in their market outreach plan and this can be facilitated by protecting their patents.
  4. Minimize competition – Getting a patent grant at an early stage helps the start-ups to stand tall among the many players. It also dithers others to do what you are doing as the sword of infringement hang if you have a granted patent.

"Many banks and financial institutes allowpatent as asset guarantee for loans. So it goes the ways – "Early filers are the Winner's", he added.

Make Costs and Marketing Considerations

Patents are regional and you will succeed in stopping competition only in the country in which you file and hold a patent. If your innovation has market potential abroad, it will be necessary to budget for the cost of applying for a patent in your target countries.

"But before that, you need to counterbalance this expenditure against the patented item's anticipated revenue over the lifetime of the patent," warns RaghavKanoria, Founder and Partner at Neoleap Business Ventures LLP, and Co-founder at Calcutta Angels Network.
Baishali Mukherjee

Former Freelancer

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