Inventors, entrepreneurs, startups, and SMEs with new product ideas for hard goods worry about when the right time to pursue patents for products is. The fact is that patents are very costly to file, maintain, and enforce, and money is often at a premium for startups and smaller businesses with a new product idea that they’re trying to bring to market.
So, in this post, we’ll explain the pros and cons of patenting a new product and when doing so might be appropriate, as well as some other IP protection best practices that you should implement as well as or instead of filing a patent.
The disagreement over whether patents are truly required for new hardware products.
People with new product concepts are rightly concerned about protecting their idea, but there’s some disagreement about the necessity of patents at an early stage in your new product launch project.
The first thing an IP lawyer in your country might suggest is obtaining a patent for your new product idea if you think it’s unique. Investors, too, might favor a patent because it improves your fledgling company’s valuation. But maybe they’re approaching it with too traditional a mindset.
Another opinion is from people who have often been there and done it on the business side, who sometimes believe that filing a patent at such an early stage is just throwing money away and that it’s useless. Here is an example:
Barbara Corcoran has invested in nearly 30 companies over the past six seasons of “Shark Tank.”
In a new Reddit AMA (Ask Me Anything), Corcoran says that from her experience, the worst mistakes an entrepreneur can make are “pissing away money on patents and PR” and not being confident enough.
She explains:
The right dance steps are: 1) make the product 2) get some sales 3) make the big guys envy you and only then get a patent.
So, who’s right about the need for patents for new products, or not?
IP protection best practices for new hardware products
Before discussing patents further, there are some best practices that are relatively straightforward to implement straight away that will really help you protect your IP. Following these best practices will also help you to obtain a patent later on because when your application is made it will be clear that you have already been taking steps to protect your product IP and have not been sharing it around unprotected with however many parties.
- Always get people in the industry, such as potential industrial designers, manufacturers, or distributors, to sign an enforceable NDA. This helps to protect you from accidentally disclosing product information without protection which can affect a patent filing later.
- Avoid putting the product onto crowdfunding sites like Kickstarter or on the internet in general before your project is somewhat mature because copycats will see it and will copy it if it’s unique and has the potential to sell. (However, make sure to get plenty of feedback from target users!)
- If working with a design house or manufacturer on a new product development, use an enforceable product development agreement which outlines who owns which deliverables. This will prevent them from ‘owning’ the product design if they work on it.
- The same for manufacturing, an enforceable manufacturing agreement will clarify everyone’s responsibilities and your expectations, and it often includes an NNN agreement portion which will prevent your manufacturer from misusing your IP (such as producing your product and selling it to others).
- Make your product harder to copy by hiding information, such as removing component markings and adding a layer of epoxy to the PCBA, which will make it harder to reverse engineer.
3 patent types and their approximate costs
These are the types of patents for new products you’ll probably be considering for new hardware goods and you typically need to file them wherever the product is being sold:
- Design patent: this applies to your product’s appearance — relatively easy to obtain, but also quite easy to get around by creating a product that just looks a bit different. More relevant for, say, a new automobile with a specific style that the maker doesn’t want competitors to copy.
- Utility patent: this applies to your product’s mechanics and function/s – difficult to obtain, but is a stronger protection. Competitors won’t be able to create a product that solves a user’s problem using your product’s exact mechanism, so they need to do something different.
- Provisional patent application (PPA): for the USA market, and provides only 1 year of protection. The PPA will allow you to disclose product information with protection during development, but then you have to file a patent or drop it before it expires.
Design and utility patents are expensive to file and you might typically spend between 10-50,000 USD (and it can often be more). You also have to pay an ongoing fee to maintain the patent, and defending the patent legally may easily cost tens of thousands of dollars again.
A PPA, while only a temporary solution, is far cheaper, costing only 2-300 USD, so when you feel ready to start approaching potential distributors, manufacturers, etc, it may be a good time to get one and use that year to push ahead with the project and gain market traction knowing that you have protection to publicly disclose details and then still be able to obtain a full patent.
When is a good time to get patents for new products?
You can file for a patent at any time as long as you have the necessary details, but given the high cost, companies with a new hardware product concept need to think carefully about making the investment.
Before filing patents for new products, or even PPAs, consider the following:
- Validate your business. You’ll need to do market research by speaking with your potential customers to gauge their feedback on the product concept. What’s their reaction to its design, functionality, and cost? This will influence your design, sourcing, and development. Protecting IP is not as grave an issue when doing market research with consumers as it is when discussing the product with people in the industry, so you can disclose some product information to them. You might perhaps even choose to do some online advertising and assess the data from the ads to see if the product had a favorable reaction. For instance, how many clicks, how many signups to learn more, what were the poll answers, etc?
- Validate if the product is technically feasible. Can you actually make the product in order for it to do what you plan? An industrial designer may be working on some proofs of concepts at this time.
- Start doing some/a lot of the new product development work. The new product development process includes many key steps that shouldn’t be skipped, including DFM, DFQ, product qualification, etc. Hopefully, you will have gotten to the point where you have a prototype that is either close to or actually final.
Above you can see just 3 bullet points, but there’s a formidable amount of work required to even get you to the stage where you have a late stage or final prototype (I wrote about this here). This could take many months or even a year or so. So applying for the PPA too early could leave your product idea under-protected when you finally start speaking with industry parties.
- Start crowdfunding and/or speaking with investors, and speaking with potential suppliers. If you have gotten to this stage without any public disclosure of the product information, you will need to provide product IP to these parties, so NOW would be a good time to get the PPA (assuming the USA is your main market… for Europe the approach is different but in our understanding, the result can be roughly the same).
Now you have one year of protection from the PPA… during this time you will hopefully be getting the product on the market and making sales.
- You have started selling and seen a good market response. A favorable scenario would be that within the one-year period of the PPA, you are able to get the product onto the market, start making sales, do a couple of production runs or so, and get a good market response. If this is the case, investing the funds to cover the costly patent application at this point makes a lot more sense because your product is already earning its keep and has a market presence that might start to catch the eye of would-be competitors.
Maybe your first product version doesn’t need one at all…
It must be said that in many cases for new hardware products where money is at a premium for the startup or business bringing it to market, concentrating on obtaining the investment and then sales to survive the first couple of years and gain a foothold in the market is probably more beneficial than worrying about a patent during that first year or two, especially if you take other steps to protect IP.
Many importers in this position, protect IP by following the steps discussed above and then go ahead by launching a V1.0 of the product on the market without a patent. This V1.0 is simpler than their dream concept, but it’s good enough to start making sales and building a market presence.
If this occurs, the importer will start developing V2.0 or even V3.0 and it’s in these versions that include a lot more of their ‘special sauce,’ which could be unique features, mechanisms, or functions. This is the version of the product that really requires the patent, but the ability to launch it is underpinned by the fact that the importers invested the money that would have been spent on a patent into getting V1.0 on the market and selling in the first place instead of filing the patent.
Note though, in this case, if your launched V1.0 product that didn’t have a patent does include innovative features, you can’t later go and patent these in V2.0, 3.0, etc, because they will have been classed as having been disclosed without protection in the public domain. So this is why a simpler V1.0 to build market share is perhaps preferable, then later patenting product iterations that contain your most innovative and unique IP.
Will a patent protect your new concept against large companies bullying you or Chinese copycats trying to compete?
Ultimately, if your product is successful it will attract the attention of large companies in your industry and also copycats (who may be based in China). In both cases, a patent for your early product concept is of dubious value, here’s why…
Large companies
Large companies may not take kindly to an upstart with a good idea eating into their market share, so they may file a complaint against your design. This will lead to a new business needing to find the money to defend a patent and has sent businesses bankrupt due to legal costs (as it almost did with Dyson in the 80s). The big boys have deep enough pockets to pay lawyers, and they bank on you not having the same financial clout. Having a patent in this case, then, is not much of a deterrent, and could end up costing you. A better defence against this scenario is to launch a simpler V1.0 that doesn’t attract their attention and build up momentum under the radar. Then, by the time this happens if you’re unlucky enough that it does, you will have a V2.0 or 3.0 product on the market that is selling well, and you will not only have solid market share, but you’ll also have the funds to defend the patent you now have.
Chinese copycats
Realistically, is a Chinese copycat going to care if you have a patent in, say, the USA? They might be copying your product and selling it in China in which case prosecuting them from abroad is going to be very challenging unless you also have a patent in China (even more money is required for that). They might still undercut you in your own market by dropshipping there from China, but, patent or not, that could happen anyway.
Some importers get to market as quickly as they can in order to start selling and gaining market traction which could prevent even the fastest copycats from beating you there and ‘eating your lunch.’ Following IP protection best practices and being careful about not sharing your product IP with too many parties could help to keep your idea under wraps and away from the gaze of copycats until you’re a lot closer to launch. Also, you need to take into account that a patent makes your product’s design and/or innermost workings completely public, and that includes being available for your competitors and copycats to see.
Conclusion: Are patents for new products worthwhile?
IP lawyers would argue that they are, and it’s true that patents will protect your IP if you have something that is particularly unique. But for inventors, hardware startups, and SMEs with a new hardware concept, the trade-off between investing in patents for new products or sinking that money into growing the business and gaining valuable market share is a tough consideration.
When money is tight, it’s arguably more valuable to invest in new product development, marketing, and growing your business so you have the solid foundation required to grow over some years, while following IP protection best practices, and then, once the business is on better financial footing, to invest into patents once you have been able to launch more sophisticated versions of your product.
On a final note, all entrepreneurs believe they have a very high-potential and revolutionary product in their hands, but challenging that is a healthy measure. Over-investing, and not focusing first and foremost on getting customers’ money, has killed a lot of startups.
P.S.
We spoke about this topic on the Sofeast podcast and you can listen to the full discussion here: When to get a patent for your new product?
Disclaimer…
We are not lawyers. What we wrote above is based only on our understanding of the regulatory requirements and patents for new products. Agilian Technology does not present this information as a basis for you to make decisions, and we do not accept any liability if you do so. Please consult a lawyer before taking action.
