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Protecting IP portfolio is ket for life science startups

Dan Emerson

For technology-based startups, building and protecting an intellectual property portfolio is one of the keys to developing a profitable enterprise.

Jeff Schox, a San Francisco-based patent attorney who has filed more than 500 patents in the past 15 years, offers some advice for navigating the IP landscape.

According to Schox, two of the most important questions for life science entrepreneurs when talking to investors are: “Can you patent your invention?” and “Can you sell it without infringement by competitors?”

A patent portfolio is an investment, says Schox, founder of Schox, PLP Patent Group. To maximize the return on investment, he says the patent attorney's role is to help clients identify and screen inventions, determine the patentability of these inventions, and evaluate the economic value of a patent application on their inventions.

Protecting intellectual property is not the only function of patents, Schox points out. For startup companies, the most important reason to file patent applications is to increase the company's valuation in the event of an acquisition.

For larger companies, one of the primary reasons for filing is to enforce their patents against competitors. But, that strategy “doesn't work all that well in the startup space,” partly due to the time required to complete the process, he says. Along with capital, time is something startups typically lack.

“You might get a patent approved in a year and a half if everything goes well. But generally it takes two to three years; it could take three to four years to go from provisional filing to actually getting a patent,” he says.

In protecting intellectual property, litigation is not the preferred strategy for startup companies, Schox notes. Early-stage startups do not have the money, or time, to enforce their patents. “It is not about enforcement, but rather valuation – during venture capital funding and acquisitions,” he says. “Litigation costs millions of dollars, which is exactly what our startup clients are trying to raise, not spend.”

One of the major fears for investors in life science companies is a successful patent infringement suit filed by a competitor that could put the company out of business, Schox notes. Companies safeguard themselves against such litigation by hiring a patent attorney to conduct an FTO (freedom to operate) analysis – a search of existing patents to determine whether a certain product infringes any existing patents.

To avoid unnecessary costs and effort, Schox recommends that life science companies limit their FTO searches to direct competitors, rather than a larger universe of companies. “‘Scaling’ your FTO to just your competitors is going to save you tons of time, a lot of money and headaches,” he says.

As a startup develops its IP portfolio, Schox emphasizes the importance of filing just the right amount of patent applications at just the right time. “File too many too soon, and the startup may have to later abandon some patent applications, which is terrible for several reasons: they wasted their time, they wasted their money, and they taught their competitors how to practice their inventions. File too few too late, and the startup may be allowing a competitor to compete in their space without enough adequate protection. Or they may be leaving money on the table during an acquisition.”

Schox cites a major change in U.S. patent law that will take effect on March 16, 2013, converting the U.S. patent system to a “first to file” system. Under the new law, if two inventors independently create the same invention, the first to file a patent application will get the patent, regardless of which one was the first inventor. To effectively protect their inventions, life science entrepreneurs will want to “file early and file often,” Schox says.

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