No small feat: For small businesses, approaches to patent protection are anything but equal

Boston Business Journal

 

Friday September 25, 2009

by Mary K. Pratt, Special to the Journal

 

Gary Magnant is applying lessons learned from his prior experiences with patent protection as his company's new product prepares for launch. Right from the start, the entrepreneurs at SpectraLights LLC knew they had to get patent protection for the company’s core technology. So, despite the tight finances that come with bootstrapping a startup, the year-old Shrewsbury-based company has budgeted about $600,000 to cover the costs of seeking patents both domestically and internationally.


“For the solutions we’re bringing to the market, it was a prerequisite,” said John Carnegie, a strategic development consultant working with SpectraLights, which designs and makes solid-state lighting fixtures. “We knew that in the process of seeking patent protection we’d also make the company of better interest and value for the future, whatever that may hold.”


SpectraLights has applied for five patents, and Carnegie said the company is preparing applications for several more. He said company officials believe that the patents are core to the business’s future, as having a strong intellectual property portfolio from the start “increases value and options.” In fact Carnegie said, officials felt it was so strategic, that the sole full-time employee, COO Paul Kennedy, was chosen in part because of his past experience with patents in material science and manufacturing.


“Between that and our IP attorneys, we can balance both legal and practical strategies to have the most successful execution,” Carnegie said. Seems logical. But not all small businesses with innovative technologies approach patent protection this way. Nor should they, IP experts say.


Patent protection can be important, but small businesses — probably more so than their larger counterparts — need to weigh the importance of patent protection against the cost constraints and resource limitations that they’re more likely to face due to their size and the current economy.

 

"Many small businesses realize that the venture capitalists and financiers are getting more sophisticated with how intellectual property portfolios help overall valuation of the company," said Eric P. Raciti, a partner at the IP law firm Finnegan, Henderson, Farabow, Garrett & Dunner LLP. "So you have to have more than a stack of patents. You have to understand how those patents give you a competitive advantage, how those patents translate into products and what those products' place is in the market."

 

Small businesses today are more thoughtful about what they want to patent, Raciti said, in part because they have less money to spend. They're less likely to patent something that's not at the core of their business, and they're less likely to file for patents in foreign countries on the chance that they might some day enter those markets.

 

Entrepreneur Gary Magnant learned early the value of a focused IP strategy. Magnant was awarded his first patent for a previous enterprise he ran in the late 1980s.  The patent was for a gel casting device. Soon after Magnant got it, he started to suspect that a competitor knocked off his invention. At the same time he realized that the market for his product was small - he estimated it was just a few hundred thousand dollars. When he confronted his competitor about his suspicions, the company's attorney simply invited him to file suit if he felt that was a case.

 

Magnant said he weighed his options and decided it wasn't worth the time and money to pursue the case.

"I learned you only patent what you plan to defend," he said, adding that the $ 30,000 he spent patenting his invention was essentially, in the end, a waste of money.

"I didn't know enough about this whole area, and I was reliant on these patent folks who insisted this was the right way to go. They didn't care about the market, their job was to get me a patent," he said. "So ever since that time, I'm very careful about where I apply for patents and how I spend money."

He said he has learned to do as much homework in advance, handling upfront research on his own. This helps keep the costs of seeking patents in check and helps him develop a better understanding of the patent's strategic value in a particular market.

 

Magnant is now CEO of Sage Sciences Inc., a biotech instrumentation company in Beverly. The four-year old company has five employees and plans to launch its first product - the Pippin Prep, which automatically analyzes, purifies and extracts electrophoretically separated DNA fractions in about an hour - later this year and have it available worldwide next year.

 

Magnant said he's applying the lessons he has learned from past ventures to guide him through the patent process today. He said his company has filed for a few patents here in the United States and expects to apply for more in the future. He said he also expects to seek patent protection in foreign countries that could be prime markets. But he's not seeking patent protection for everything - innovations or technologies that are difficult or impossible for others to figure out are sometimes best protected as trade secrets.


Dave Robinson, CEO of New England Peptide LLC, an 11-year old company that designs and produces custom peptides and polyclonal antibodies for drug and vaccine discovery companies worldwide, said his company is keeping its proprietary software as a trade secret rather than getting patent protection, even though its core to the Gardner company's business.

 

Robinson said company officials believe that keeping the software, which is used to manage customer information and the company's own best practices, as a trade secret was the best route because the company has no intention of licensing or selling it.

 

"We're a small company, and we have to focus on delivering for our customers," he said, noting that deciding whether or not to put resources into seeking a patent "is a balancing act."

 

Robinson said he hasn't ruled out seeking patents for future innovations being developed by New England Peptide, but for now feels that he has the right amount of IP protection for his company's strategic needs without patents.

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