Should I Get A Patent Before Talking To Customers?

No. As an investor in patents, I am willing to wait for the Second Patent.

In my business of financing patents for startup companies, I am usually willing to pass on the First Patent for a startup.  I want to finance the Second Patent.

Why? Because I want you to talk to customers BEFORE getting a patent.

The First Patent is the patent on the Big Idea of the company. Every startup seems to have some epiphany of a unique solution to some problem. However, all we have at this stage is an idea. We have little technical validation, and we certainly have no market validation.

I want to wait until we have market validation before I finance a patent.  I am perfectly willing to wait on the sidelines until the market begins giving its feedback. Have some questions? Let's talk.

There are two reasons why I don’t want to finance the first patent. 

The first reason is that it has the highest risk of any patent that the company will produce.

From a pure risk standpoint, the First Patent is the highest risk patent.  At the beginning, we do not know the technology risks that are lurking under the rocks, but we also have not had the
customer’s input into the business. 

Steve Blank famously said that “No business plan survives its first contact with a customer.”

We just don’t know what we don’t know at the start of a venture. We expect that a business will pivot a few times as it begins to understand what the market really needs, so it is probably premature to get a patent before going through that product market fit process.

The second reason is that the business will (likely) be better protected by the second patent than the first one.

Identifying a hole in the market is a long, iterative process, but it is also the process of plowing
new ground. Nobody has seen this area of the market, so we are beginning to solve problems that nobody has seen before.

There are many problems to solve once you begin down this path that no one has traveled.  You are beginning to see problems that nobody has ever solved.

Consider the Apple iPhone. 

At the beginning of the project, someone could have said “I want a patent on a touchscreen phone.”  This was the inception of the idea, but only the first step. 

Once the team began working on this project, they were breaking new ground.  Nobody had done a touchscreen phone before.  In fact, every phone had a green button and a red button to answer and end calls.

What is the first problem that needs to be solved in this space? How do I answer a call?

The simplest problem of a touchscreen phone is one that nobody would have ever thought of unless they needed to go down that path.

Apple’s most valuable patent – the one that they used to sue Samsung – is the Slide to Unlock patent[1].

Think about it: Slide to Unlock is the first problem that any competitor would have to face if they made a competing device.  Slide to Unlock is gloriously elegant, fits Apple’s design aesthetic, and captures the essence of the iPhone.

Slide to Unlock is so good that Google was forced to copy it when it created Android.

When I say that I want to finance the Second Patent, I often use this story to illustrate that there are far better patents down the line. Entrepreneurs tend to be enamored with their Big Idea and often want to get a patent on their Big Idea. Investors likewise often think that a patent on the Big Idea is a good thing.

I think otherwise.

A patent on a Big Idea is usually a waste of time, but many times it is downright dangerous.  We will discuss this in more detail later in this book, but here is the quick reason why:

Patents done so early in the process need to contain a lot of speculation.  At this time in the business, we have very little information about the product and the market, so there is a tendency to add a whole bunch of ideas into the patent application.  These ideas are usually too thinly described to be claimed in the patent, but will definitely become prior art when we
figure out which one was the winner.

Yes, it would be nice to have a patent early in the life of a company.  It lends some credibility and hope to the story of a startup company, but in almost all cases, early patents are more
damaging then helpful.

My advice is often to use the one-year grace period in the United States.  The US gives a one year from public disclosure to when you need to file your patent.  As an investor in patents, I often tell startup companies that I am happy to sit on the sidelines and wait until we
have some customer input before starting on the first patent.[2]

Before I invest, I want customer validation.  The ideas are easy, but the execution is difficult.  When I see a company with customer validation, I want to invest.  But more importantly, I want the patent that captures the customer’s purchase intent. I want the patent on that specific element that the customer sees as valuable.

But more importantly, I want data that supports the investment.  Investment Grade Patents are not wishful thinking. They are highly researched, thoroughly supported assets that have defined value prior to making the investment.


[1]
US 8,286,103, US 8,046,721, and US 7,657,849. 
These patents were litigated in the ongoing Apple v Samsung patent lawsuits.

[2]
Note that Europe and most of the rest of the world do not have a one year grace period.  Following this advice ensures that you lose all international coverage, so this is not a one-size-fits-all suggestion.

Posted in Patent Basics, Patent Strategy, Patent Myths

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BlueIron Invests in Startups

Pre-revenue startups can apply for BlueIron's patent financing, which is typically a $50-100K investment initially, with appropriate follow on investments.

For Series A/B or later stage companies, BlueIron can provide $2-5M loans, using patents as collateral.

Patent enforcement and defense insurance are also available.

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