What Rights Will I Lose if I Pitch My Invention to Investors Before I File a Patent Application?
Tuesday, May 30, 2017

Did you know that the individual often credited with popularizing karaoke did not reap the financial rewards of his invention to the extent possible?  It's true—Japanese musician Daisuke Inoue invented karaoke in Kobe, Japan in the early 1970s, and as we all know, karaoke became, and still is, popular in the United States and globally.  However, Inoue did not patent his invention, and sadly, he did not capitalize on this popular form of entertainment.  This is just one example of a failure to capitalize because the invention wasn't patent protected.

Why Seek Patent Protection?

The reasons for seeking patent protection include:

  • Having the ability to exclude others from making, using, or selling your invention thereby providing you a competitive edge over others and providing a level of confidence to potential or current investors. 
  • Having a patent may afford you the opportunity to license or sell rights to others to make, sell, or use your patented invention thereby allowing you to generate a royalty stream or other revenue. 
  • Many companies will not license or buy your product or even your business without patent protection. 
  • Patents also allow you to build actual or perceived value in a new or even a well-established company. 
  • Filing a patent application further allows the term "patent pending" to be used in connection with your invention as it is described in your patent application, which may appeal to consumers and generally discourage competitors from copying your product before you obtain a patent. 
  • Often investors will refuse to sign a confidentiality agreement for reasons that do not pertain to wanting to steal or misappropriate your invention, and filing a patent application allows you to stake a claim to your invention before your non-confidential discussions with potential investors. 

Public Disclosure of Your Invention May Place Patent Protection at Risk

After discovering an invention, often your next step will be to begin monetizing your invention whether by raising money to support testing, or commercializing your invention, or attempting to license or sell it.  Regardless, the next step in furthering the progress of your invention usually entails disclosing your invention to a third party.  However, unless you obtain an enforceable confidentiality agreement before the disclosure, you risk losing the benefit of a patent on your invention. 

In most of the world, the standard for obtaining a patent has generally been absolute novelty, requiring the filing of a patent application prior to disclosure of the invention.  The system was different in the United States until passage, in 2011, of the Leahy–Smith America Invents Act ("AIA") which provided that as of March 16, 2013, the United States adopted the first inventor to file ("FITF") patent system. The AIA harmonized the United States patent system with those in the rest of the world. 

Accordingly, in most cases, it is now the first person to file a patent application who receives the patent instead of the first person to invent.  Obviously, disclosure prior to filing is dangerous because it jeopardizes the inventor's priority in filing.

What Constitutes Public Disclosure?

The following is a list of non-exhaustive activities and types of information that can be considered public disclosures preventing you from obtaining a patent if they occur more than one year before you file a patent application:

  • Patents or patent applications;
  • Publications such as articles and abstracts;
  • Blogs or social media postings;
  • Public presentations, e.g. conferences, non-confidential pitch meetings, public displays;
  • Public use, e.g., trade shows, advertisements; and,
  • Selling your invention or even offering to sell it.

The United States' One-Year Grace Period

Any of the above or similar public disclosures start a one-year clock for filing a patent application in the United States.  If your patent application for your invention is not filed within one year of its first public disclosure, you will have likely dedicated your invention to the public. 

The AIA, however, provides you, as an inventor, a one-year grace period following the disclosure of your invention to someone else if the disclosure is made by you as the inventor, someone who obtained the disclosed information from you, or a joint inventor associated with you generally pursuant to a joint research agreement.

When Patent Protection May Not Be Your Best Option

A patent may not be an option or your best option in some situations.  For example, by statute, in order to obtain a patent, the United States Patent and Trademark Office ("USPTO") must determine that your invention is new and not obvious in view of existing technology.  If your invention can be designed around with ease, or there are equally viable alternatives available, it may not be worth allocating your resources to patent protect the invention.

In some instances, the technology may be obsolete within a short period of time such that the time to obtain a patent or the 20-year patent term may not be worth the time, effort, or expense of trying to obtain a patent. 

Lastly, it may be more beneficial to maintain your invention as a trade secret.  After all, a patent does teach the public how to create your product in exchange for a limited monopoly allowing you to prohibit the public's ability to create the product for a limited duration of time.  In contrast, maintaining your invention as a trade secret provides a potentially unlimited duration of protection if the technology is kept confidential using appropriate safeguards.

What You Should Do If You Decide to Apply For a Patent; Use of a Provisional Patent Application

Should you decide that patent protection is appropriate for your situation, a provisional patent application can provide you an opportunity to set a "priority date," that is, the date used to establish the novelty and/or obviousness of your invention relative to that which was known in the prior art at the time of your invention.  This allows you priority while buying one year to decide whether to proceed with patent protection. 

In general, a provisional application preserves your filing date for one year.  Your provisional application will not be examined for issuance as a patent.  It can be very informal and it is not required to have a formal patent claim, or an oath or declaration.  However, priority, and thus, patent protection, will be provided only for what you disclose in the provisional application.  Therefore, it is advisable to file a thorough disclosure in the provisional application.

Your provisional application will generally expire 12 months after you file it, at which time you will lose its benefit.  However, you may retain the benefit of your provisional application if you either:

  • File a nonprovisional utility patent application, an international patent application, and/or a foreign patent application within 12 months of when you filed your provisional application; or,
  • File, within 14 months of when you filed your provisional application, both a grantable petition under the applicable regulation and either a nonprovisional utility patent application, an international patent application, and/or a foreign patent application.

If you do not either file the grantable petition and/or one of these three filings within the specified time periods, you will lose your priority date associated with your provisional application, and consequently, any patent rights to your invention as of that original filing date. 

If you are interested in patent protection in the United States only, you may decide to file a nonprovisional utility application that claims priority pursuant to your provisional application.  The successful prosecution of a nonprovisional utility application in the USPTO will result in a patent generally having a 20-year patent term.

Summary

Because of the 12-month grace period in the United States, and generally no grace period in the rest of the world, you may run the risk of losing the benefits of your invention as a result of a public disclosure.  To protect your invention, you may opt to file a provisional patent application before launching a fundraising campaign or discussing your invention in general.  This option has become particularly attractive under the FITF patent system in the United States.  Filing a provisional patent application will allow you to claim priority for your invention while determining during the one-year period whether to proceed with trying to obtain patent protection and will also allow you to pitch your technology to third parties with a certain level of assurance. 

 

NLR Logo

We collaborate with the world's leading lawyers to deliver news tailored for you. Sign Up to receive our free e-Newsbulletins

 

Sign Up for e-NewsBulletins