Patent Law for Startups: Why the Timely Investment in a Patent Portfolio is Crucial

By Mikayla Walsh and Chris McHattie

For startups, innovation is everything. But what protects that innovation from being copied, stolen, or lost in a crowded marketplace? The answer lies in patents — a legal tool that not only protects your breakthrough but also positions your business for long-term success. Whether you're building the next great app, device, or platform, understanding how and when to file a patent can make or break your competitive edge.

Historically, a "patent" originated from the Latin "litterae patentes" (open letters), used by monarchs to grant rights and privileges. Those letters evolved into a government grant to an inventor, securing exclusive rights to make, use, and sell an invention for a limited time, a “patent.” The term “patent” has thus evolved to mean: a legal document granting an inventor exclusive rights to their invention for a limited time, typically 20 years. A patent grants the inventor a monopoly on “making, using, or selling” the invention without their permission. Specifically, 35 U.S. Code § 271 - Infringement of Patent, provides that “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.”

Companies and individuals have harnessed these patent rights as powerful underpinnings of successful and sustainable businesses. The Patent Act, specifically 35 U.S.C. § 101, outlines the requirements for patentable subject matter, including “new and useful processes, machines, manufactures, or compositions of matter.”

This societal “stratagem” and structure has been created to ensure that humans are motivated to innovate and to protect the investment of time and resources that allowed that innovation to happen. It helps ensure that the results of hard work solving problems is not simply copied by competitors without any of the costly expense of the research and development the innovator incurred.

So, patent your invention, protect your investment in research and development and maintain your place in the market!

The Value of a Patent Portfolio
Why Investors Care About Patents

An established patent portfolio is a highly regarded and valuable asset, and an indicator of legitimacy and sustainable profitability, and that you “know what you are doing.” The “exclusive” monopoly granted when a patent is granted allows for higher valuations, greater opportunities for licensing and partnerships, and investor attraction. Where competition in a particular space is limited, investors are often eager to avail themselves of the opportunity for growth. “Scalability,” that touchstone of success, is directly related to protected position in the market and is frequently dependent on available capital for continued research and development; which in turn leads to continued profits and renewed and extended market exclusivity.

Google’s Story: A Patent That Changed Everything
Google®, which is no longer simply a company name, but also a verb, is a prime example of a startup turned trillion-dollar company, attributable to a patent. In its early days, Google was just another search engine competing with well-established players such as Yahoo, Netscape and AltaVista. However, in 1998, Stanford University filed for U.S. Patent No. 6,285,999, titled "Method for Node Ranking in a Linked Database," directed to the development of a groundbreaking algorithm known as PageRank. Larry Page, one of Google’s two founders, was listed as the inventor. Google licensed this patent from Stanford, giving it a significant competitive advantage over other search engines. The PageRank algorithm transformed Google into the most effective search engine, leading to explosive user adoption and increased advertising revenue.

The Google® patent was so valuable that it helped Google® secure early venture capital funding - a crucial element in its rapid expansion. In 2001, Google® extended its exclusive rights to the patent by renewing its licensing agreement with Stanford, further solidifying its competitive edge.

Ultimately, the success of Google’s PageRank patent played a critical role in Google's dominance in search, which later allowed it to expand into other areas like advertising (Google® Ads), mobile software (Android), and cloud computing (Google® Cloud). Today, Google® is a trillion-dollar company and household name, and its early reliance on patented technology exemplifies how intellectual property can be a pivotal asset for startup growth. Google now has over 50,000 patents.

The Basics of a Patent

Most people don’t know that there is a quid pro quo for a patent; the inventor is required to not only fully disclose the invention, but the inventor is also required to disclose what is believed to be the “best mode” to practice the patented invention. In exchange for that disclosure of an invention, we as a society grant the inventor the right to exclude others from making, using or selling their invention for 20 years.

Patent Eligibility

To be eligible for a patent, the invention must be a process, machine, manufacture, or composition of matter, or an improvement thereof, that is “new,” “useful,” and “nonobvious” to a person of ordinary skill in the art. While this seems simple enough, it’s not. These seemingly simple elements of patentable subject matter have themselves evolved into a substantial body of law around the analysis of what is, and is not, patentable and what has or has not already been done.

Two of the fundamental elements, “known” or “obvious,” require comparison of the invention to what is already patented or in the public domain. Making this determination, otherwise referred to as “prior art” analysis, starts with a search of prior art, and then a comparison of that prior art against the “claims” of the invention. The “claims” are what actually define the monopoly, and in order for another device to infringe, it must include each element of the invention set forth in the claims, or an equivalent thereof in certain circumstances. If a claimed invention is found to be either already known or obvious, such a finding is a bar patentability. This is typically a very fact-specific inquiry.

How You Might Accidentally Lose Patent Rights
Imagine, you’ve spent weeks, months, years, of your life perfecting a novel, breakthrough technology and out of pure excitement, you disclose your hard work to friends, pitch it to investors, host presentations about your invention, or start selling your first small production run. You could have just unknowingly sabotaged your right to a patent by making your own invention “prior art” which can be cited against your patent application.

- The One Year Grace Period: The America Invents Act (AIA) was signed into law on September 16th, 2011, and became effective on March 16th, 2013. Amongst its provisions is a 1-year grace period, in which an inventor has the right to file an application for a patent providing it is less than one year from the date of public use, sale or disclosure.

What exactly does this mean for you, as an inventor? This means that as soon as you disclose, use, or begin selling your invention, the patent-eligibility clock has started ticking. You have a year from the earliest date any of the foregoing acts in order to preserve your right to a patent.

- The Race to the Patent Office: Prior to the AIA, the U.S. Patent system was a first-to-invent system. This is no longer the case, and we are now a “first-to-file” jurisdiction, a change that dramatically impacts inventors.

The first-to-file system creates a “race to the Patent Office” and in simple terms, the first to file wins. So, if two people have invented the same invention, whoever files first wins, and the other party, who also invented, is out of luck and the invention is no longer yours to patent. Understandably, this is most likely to occur when a particular field is crowded with researchers and developers, and some well-established need is hurriedly being studied and innovated around.

Though it may seem unlikely that someone may file an application on your exact invention (it’s actually not that uncommon), this is not the only way you can be ousted of your right to a patent by another’s more timely application. Most notably, another applicant can also beat you out of a patent by filing an application that may be used as “prior art” against your invention, making your patent obvious in light of the prior filed application. An application filed that may indirectly resemble your invention, or touch ever so slightly on your method or apparatus, or even merely disclose your invention without making a claim to it, is all grounds for potential rejection.

- Provisional Applications to Preserve your Spot: A provisional application is short-form application filed to preserve, for one year, your spot in line at the Patent Office, and it acts as the “first to file” filing. The requirements of a provisional application are substantially less than a non-provisional application. This means that it is both less costly to prepare and file, requires less time than a non-provisional application, but can still serve to establish the effective filing date of your invention It is important to remember that a provisional application only saves your place in line and creates a one year window, it is not a “patent application,” per se and the formal non-provisional application must be filed within that window. However, assuming no intervening filings that would create a “first to file” bar, you are still able to file after that date or even file another provisional “place holder.”

How Startups Can Build a Strong Patent Strategy

1. Do Searches and File Applications
Developing a “streamlined” and cost-effective process for determining if an invention is patentable, and if so, filing provisional applications as a part of a process, can greatly increase your likelihood of “patent” success. Preliminary patent searches and provisional applications as a part of your research and development process will help establish priority dates and increase the likelihood that your efforts won’t be wasted. The earlier you file, the less “prior art” will be available to be used against you to deny your patent application.

2. Consider International Protection
Businesses that are scalable and set up for growth are inherently more valuable. Where international expansion is on the horizon, international protection has to be considered. International patent protection through the Patent Cooperation Treaty (PCT) and WIPO (World Intellectual Property Organization) can provide exclusivity in other countries outside of the United States.

3. Stay Vigilant in Enforcing Your Rights
Unfortunately, enforcing your rights against third parties is a crucial part of the process. Why get a patent if you’re not going to enforce it? You must be diligent in understanding the work, products and services of your competitors. Conducting frequent searches and partnering with Intellectual Property attorneys and professionals can help to maintain and protect the rights you’ve been afforded.

4. Include Intellectual Property Clauses in Agreements
When working with suppliers, vendors, manufacturers, and business partners, it should be standard practice to use Non-disclosure Agreements and to include clear IP clauses in agreements that ensure that you and your company own your IP. This ensures that your proprietary technology, trade secrets, and patents remain protected and yours. These clauses should define ownership rights, restrict unauthorized use or disclosure, and establish confidentiality obligations. Without proper protection, third parties could inadvertently (or intentionally) exploit your ideas, jeopardizing your competitive edge. Consulting with IP attorneys to draft strong agreements can help prevent disputes and ensure that your startup retains full control over its intellectual property.

Investing in your IP and a well-structured patent process and portfolio is not just a legal safeguard - it is a strategic necessity for long-term success. In an increasingly competitive marketplace, patents provide the critical advantage of exclusivity, allowing innovators to secure market share, attract investors, and enhance the overall valuation of their business. However, the benefits of patent protection are only realized when founders take proactive steps; timely searching for innovation, filing domestically and internationally where appropriate, and enforcing intellectual property protections.

By integrating patent strategy into your business model early on, you and your startup can turn innovation into long-term profit and assets, ensuring that your hard work and ingenuity are not only protected but also leveraged for future growth. In a world where innovation drives progress, safeguarding intellectual property is the key to sustainable success.