There is a plethora of blogs and articles about questions startup entrepreneurs typically ask about IP (including our earlier blog post about patenting tips for Swiss Startups). In contrast to these frequently asked questions, this blog will focus on a selection of questions startup entrepreneurs should ask (or should not ask).
The patent system is based on a simple deal: protection in the form of a limited monopoly is granted in return for full disclosure of the invention. This basic principle seems to contrast with a common prejudice many people have regarding patents: that they are written in an overly cryptic way that actually leaves the core of the invention ill-defined and vague rather than fully disclosing it. Many inventors are therefore wondering if they can “hide” their invention in the shadows of complicated and, perhaps, even deliberately misleading language. However, this is a dangerous strategy which often leads down a slippery slope of increasing legal uncertainty and risk. In fact, a sufficient disclosure of the invention is required to receive patent protection for the invention.
Leaving the exact nature of the invention unclear will likely cause severe problems during prosecution, if not inhibit it altogether. It is a general and necessary requirement in most, if not all jurisdictions in the world that the invention to be protected has to be fully disclosed such that a person skilled in the art can carry it out. This requirement is taken very seriously and interpreted strictly during examination. During and even after examination, many jurisdictions offer mechanisms to attack patents that do not fulfill this criterion, including so called third party observations and opposition proceedings. It should also be noted that it is not possible to leave out crucial information in the patent application at first and then hand them in later upon request by the examiner. The reason for this is the equally important and general concept that you cannot add subject-matter that goes beyond the scope of what was originally disclosed in the application as filed.
Additionally, leaving out essential features of your invention poses a difficult-to-estimate, if not unpredictable future risk regarding enforceability. Having a patent just for the sake of it may be great and may convince customers and investors alike of the value of your technology. However, like a bicycle helmet that should not just look good but also protect your brain in an accident, a patent should also be strong enough to be enforceable: This includes being specific enough to clearly identify cases of infringement but also being able to resist the rigorous cross-fire during a fierce nullity suit. Once again, leaving out crucial technical information about the invention renders the patent vulnerable towards attack, which may eventually lead to its revocation.
Taken together, you should be aware that getting a patent comes at the cost of public disclosure of your technology. In other words, this is another ‘no free lunch’ situation. That being said, while the lunch may not be entirely free, certain discount options may be available: depending on your invention, it is not required to meticulously list every single bit of detail about all different aspects of it. Rather, it is can be sufficient to disclose the concept or the essential features of the technology in order to protect it and to prevent competitors from using it. Additionally, you can strategically decide to only patent and disclose certain aspects of your technology while keeping other aspects a trade secret. Striking this delicate balance of disclosing as much as required but as little as possible at the same time is not easy and usually requires years of experience, preferably in prosecution as well as litigation.
Choosing a patent law firm can be a daunting prospect for entrepreneurs who may view patents as a necessary evil rather than a valuable asset. However, there are a few questions to consider when choosing a law firm:
It should be noted that there is a big difference between obtaining a patent in the first place and actually enforcing it in the case of patent infringement. Additionally, many patents are actually infringed unknowingly by third parties and it is frequently up to the patent owner to actively identify cases of infringement and take legal action against them. Accordingly, if you are seeking to potentially enforce your patent as well, it may be advisable to choose a law firm that has experience in patent prosecution as well as enforcing patents and, ultimately, patent litigation. An additional benefit associated with this is that experience in litigation typically enhances the process of drafting a patent: practitioners experienced in both areas tend to draft patents that strike the balance between meeting the patent office’s stringent requirements of examination and enabling the unequivocal identification of cases of infringement.
There is obviously no right or wrong answer regarding the size of the law firm. You may simply like the family atmosphere of working with a small law firm. However, larger law firms are frequently able to offer distinct advantages by virtue of their size. As an example, larger law firms typically employ attorneys in different technical areas who can quickly exchange expert opinions and provide insights into their respective fields. These synergies may be particularly advantageous if your invention relates to the interface of different technical areas. Additionally, many larger law firms are able to provide a broad scope of different legal services relating to IP without relying on outside expertise. Having a single law firm covering all aspects of IP is not only convenient for many clients, but frequently also translates into cost-efficiency.
Even if you may primarily seek assistance in the technical drafting of patents, it is important to note that many questions relating to patents and, more broadly, intellectual property do not exclusively fall under the realm of patent attorneys but also require the expertise of attorneys-at-law. As an example, such issues may range from standard contracts such as NDA’s and License Agreements to more complex questions about indemnity clauses or the legal caveats of different jurisdictions. Accordingly, it may save you time and effort to choose a law firm that is able to draw on the expertise of attorneys-at-law and patent attorneys and is thus able to provide a holistic solution to all different aspects of intellectual property.
For startups striking the right balance between short-term success like getting your product ready for the market or launching its new generation and the long-term strategy can be difficult. Having an IP strategy definitely falls into the realm of the long-term strategy. However, it can hardly be overstated how important it is to have at least a rough outline of an IP strategy even as a startup company. This is particularly true if your company depends on a small number of technologies, or even a single technology. A basic IP strategy should include defining the core technological areas and their respective importance for the company as well as a thorough analysis of external IP rights to establish the company’s freedom-to-operate (FTO). The latter is particularly crucial for startups because even the possibility of facing a costly infringement suit is not just dangerous but often fatal.
It should be noted that “developing an IP strategy” does not necessarily have to involve seeking patent protection. Alternative strategies to secure IP such as trade secrets are available and have their own pros and cons, as discussed in detail in several other blogs. Regardless what your IP strategy may look like, having a clear and unified view of it ensures that you consistently apply effective measures to protect one of your key assets, namely your technology.
Beyond protection of your core technologies, a clear IP strategy also enables you to make informed strategic decisions about the future development of your technologies. To fulfill this function, it is important that your IP strategy is aligned with your overall business strategy. This becomes even more apparent when you consider how many business implications intellectual property has at different levels across the company, including licensing opportunities, royalties and potential tax deductions on expenses relating to research and development (Patentbox). Consequently, developing an IP strategy early on will not just provide a useful tool for managing already existing IP but will also enable you to proactively guide your research and development such that it will serve your overall business objectives.
Finally, a patent on your core technology will significantly enhance your chances of attracting funding. In fact, many investors increasingly require startups to have at least a pending patent application to be eligible for venture capital, particularly if large sums of money are at stake. This means that the cost of a patent should not be viewed as mere expenditure but rather as an investment.
The word patent is frequently associated with groundbreaking achievements such as the development of light bulbs or cars. Awestruck by the genius of Thomas Edison, Carl Benz or Nikola Tesla, many people may not consider their ideas to be worthy of a patent. However, it is a widespread misconception that patents are only available for groundbreaking inventions. In fact, the crucial criterion of “obviousness” or “involvement of an inventive step” is purely qualitative rather than quantitative in many jurisdictions. In other words, even small improvements of the prior art may be eligible for a patent.
By contrast, there are other criteria an invention has to fulfill in order to be patentable. Some of these criteria, such as the requirement for novelty or susceptibility of industrial application, can be found in one form or another in most jurisdictions. Other criteria, such as what is often referred to as ‘technicity’, are less universal and can be difficult to evaluate. In this respect, questions relating to the patentability of computer-implemented inventions are particularly tricky. Different articles describing the various exceptions to patentability are available, including our blog post on how to protect your AI innovations.
Although this is less of an exotic question, it is nevertheless definitely one you should ask. It can’t be stated too often that you should not publicly disclose any details of your idea until a patent application is filed or it was consciously decided not to seek patent protection for it. Even after filing, it is best to keep your invention secret for as long as possible in order to keep the option of filing further applications on improvements of your technology.
If you still have to disclose parts of or even the entire technology, this should be done only after having every recipient of the information sign a specific non-disclosure agreement (NDA). It should be stressed at this point that the use of a generic NDA available online can be risky, as discussed in more detail in this blog post. Additionally, it is advisable to keep a clean documentation record of your disclosures, which may serve as invaluable evidence in potential future disputes regarding the date of disclosure or even ownership. Specifically, we recommend documenting all internal and external communication, e.g. by keeping and distributing meeting minutes.
Patents are national rights that grant the right to exclude others from using the patented invention. In general, a Swiss patent grants the patent holder the exclusive right to prevent others from using the claimed invention in Switzerland. More specifically, if your patent relates to a product, the patent comprises the right to prevent third parties from producing, storing, offering, selling, importing or exporting the relevant product.
To obtain similar protection for your invention abroad, you will need to file patent applications in other jurisdictions. There are several ways and strategies to do this, and in this blog post we will introduce a common strategy for obtaining patent protection abroad which works well for many of our clients.
For many of our clients we suggest filing the first patent application in Switzerland as the official filing fees are low and the patent application can be filed in English, German, French or Italian. We often recommend requesting an international-type patent search at the same time. This patent search is carried out on behalf of the Swiss Federal Institute of Intellectual Property by the European Patent Office (EPO) and lists those prior art documents deemed relevant for the patentability of your invention. The international-type search report is usually received within 4-10 months of the filing date and allows you to re-evaluate your patent application in light of the prior art.
The 12-month period following the filing of the first application is called the priority period, in which you can file other applications in other jurisdictions for the same invention. You can also, and this is what we normally recommend, file a PCT application. The PCT application is an international application which effectively postpones the time point at which you need to decide in which countries you will ultimately seek patent protection.
We recommend filing the PCT application with the EPO. The EPO will provide a written opinion on the patentability of your invention. This gives you another good opportunity to re-evaluate your patent application.
After 18 months, the international patent application is published, along with the results from the international search and the Patent Office’s written opinion on the search report. Up until this point, your application has been subject to strict confidentiality on the part of the patent offices.
Only 30 months after the filing date are you required to make a final decision as to which jurisdictions you wish to continue in with your patent application. For example, you could file for a European patent at the European Patent Office (EPO), file for a US patent at the USPTO, etc.
As outlined above, one of the major advantages of the “Swiss Classic” is that it allows you to postpone the costly and strategically invaluable decision as to which countries you seek protection in to a later point in time. However, it should be noted that the PCT application does not result in a PCT patent: the PCT application eventually diverts into a number of national and/or regional applications. Therefore, the PCT application should be drafted to be highly compatible with different patent systems. Though the patent systems in different jurisdictions are broadly similar, there are formal as well as substantive differences which invariably impact the way both the priority founding patent application, as well as the international patent application are drafted. For example, the European requirements relating to claiming priority and amended subject matter are stringent, whereas the US patent system is more permissible in this regard. Another example relates to the requirement of sufficient experimental basis to support broad claims in life science patent applications, which tends to be particularly strict in several Asian countries. A patent attorney with a working knowledge of different patent systems is ideal, both for drafting the patent application as well as guiding the patent application through prosecution to grant.
Normally you would need to decide which countries you want to obtain patent protection in within 12 months of your first filing. By filing a PCT application you can push this out to 30 months. This has the following benefits:
This patent strategy works well for many of our clients that are active in different international markets. While popular and widely applicable, this strategy is obviously not a one-size-fits-all solution and other patenting strategies may be more suitable for your specific needs. Please reach out to us to discuss your specific needs in more detail with one of our specialists.
Have you ever wondered about typical contract clauses and what they actually really mean? Here is a short introduction into clauses that you will find in most commercial agreements.
Generally, the preamble or “whereas”-clauses set the stage for the agreement. They offer background information and may define the purpose. However, there should not be anything in the preamble, that is part of the agreement between the parties, in particular any obligations. Otherwise, this may be highly confusing and sometimes contradictory or at least unclear, on whether this is background or actual agreement.
Under Swiss law, a warranty is one party’s obligation to ensure that a product has the features agreed on in the contract. If this is not the case then the product is faulty, which can trigger several options on the purchaser’s side, such as for instance a right to price reduction. The content and extent of the warranty can be regulated in the agreement between seller and buyer. In particular, the buyer’s options can be fixed to for example a repair of the faulty product.
In international commercial agreements, however, warranty is often used in a much more general sense. Often, warranties are used to describe various obligations of the parties that are specifically agreed by the parties of the contract, followed by specific remedies that apply in case of a breach of any warranties.
Hence, the contractual use of the term warranty is not always consistent and may be combined or even mixed with other legal terms such as guarantee and representations. It is important to carefully read the agreement and to understand the distinctions and consequences for each obligation.
The liability determines the financial exposure of a party in case of damages, i.e. monetary losses of the other party. Most laws permit far reaching limitations on liability other than for willful or grossly negligent acts. Very often, the parties agree on an exclusion or cap (maximum amount owed in case of damages) for so called indirect damages (such as loss of profit).
In order to be in a proper position to negotiate liability clauses, one needs to understand the likelihood and potential exposure to certain damages. For instance, if I a buy a product on the performance of which my whole production of goods depends, then loss of profit is likely to be my main risk in case of a breakdown, hence I should be very careful in accepting an exclusion of or even a cap on the liability for loss of profit.
Overall, liability clauses are crucial for assessing the risks of a contract and to check whether they can and should be covered by appropriate insurance policies.
Indemnity is the obligation to pay for any loss or damage that has been or might be incurred by the other party based on claims of any third party. A common reason for including indemnity clauses is the potential violation of third party intellectual property rights. For instance, the buyer of your product may insist that you hold him harmless against any third party who might come after him based on the alleged infringement of intellectual property rights by the product you have sold. Hence, this clause is particularly important if you source third party components (for instance software or products in emerging fields), which you integrate into your products before selling them to your customers.
One should assess the potential exposure to third party claims when negotiating the contract and think of potential alternatives or supplements to an unlimited indemnity, such as replacement / adaptations of potentially infringing products or the taking over of the conduct and responsibilities of any legal proceedings.
Legal proceedings and costs associated with them vary greatly from country to country. If you conclude an international contract without paying attention to the dispute resolution clause, it may well be that your contract is not worth the paper it’s written on. One important item is to determine which court (or the courts of which country) shall be competent to decide the disputed under the agreement. Second, depending on the circumstances, it may be advisable to include an arbitration clause instead of a clause on which state courts shall settle the dispute.
Equally important is to agree on the law governing the agreement. Otherwise, it may well be that you agree on contractual clauses which are not valid under the law of the particular country. Or else, there may be mandatory rules of a country’s law which will apply in addition to what you have agreed in the contract.
In this blog, we will shed light on a few standard contract types relevant for safeguarding your intellectual property.
Intellectual property rights are property rights. This means, that someone is the owner of these rights. The owner has the right to determine who may use what is protected by his rights.
Typically, the original owner of intellectual property rights is the creator (note: this does not apply to trademarks), i.e. the individual who makes an invention (patent) or creates a work (copyright). However, as soon as several parties become involved in the creation of intellectual property, the legal reality concerning the rightful owner might often significantly deviate from the expectations of the parties.
For instance, if the original owner is an employee of a company, there are countries in which the rights created by the employee belong directly to his employer or in which the employee is at least required to transfer his rights to his employer if the employer wants to acquire these rights. If on the other hand, you engage a freelancer to create something, the intellectual property rights to that creation might stay with the freelancer, in spite of you having financed the creation.
Another example would be if we have several people from different organizations collaborate, such as in research or development. These joint collaborators may become joint-owners of the new creations. In these circumstances, it should be contractually agreed which party has which rights in the jointly created intellectual property, or you might end up not being able to commercially use your intellectual property without the other person’s consent.
However, these situations can be contractually anticipated and regulated. Intellectual property rights may be transferred from one owner to another owner. This may happen by way of a full transfer of all rights (like a sale, a so called “assignment”,) or by granting someone else certain use rights (like a lease, a so called “license”). The use rights may be customized in particular with regards to the scope, the time or territory.
Finally, contracts may be important to preserve your intellectual property rights in the first place, because patents and design rights may be “forfeited” if you disclose your invention or design to a third party without appropriate confidentiality clauses in place.
As explained above, it is important that intellectual property rights developed by your employees belong to the employer. Therefore, it is advisable to include a standard IP-clause in your employment agreements. If you have employees domiciled abroad, local laws need to be taken into consideration. Further, in certain settings, in particular if some of your employees are still partly employed with Universities, this topic needs to be addressed very carefully.
If you use consultants or other personnel not employed by your company, it is crucial to include in the consulting, freelancer or other agreement rules to ensure that you own the intellectual property rights created by these agents, as if they were employees. Absent such clauses, there is a significant risk that you do not own (all) the intellectual property rights created by these parties despite having funded the respective creation.
The confidentiality agreement or non-disclosure agreement (NDA) is an agreement that permits the parties to share certain confidential information before entering into any specific contract. Often, NDAs are used to evaluate a possible cooperation, which requires that certain business or technical secrets and know-how are exchanged.
It is crucial to define the scope of the confidential information clearly (for instance: is all information disclosed confidential, or does it need to be marked in a certain way). Further, it is important to keep track of the duration of the agreement and potential “survival” of certain obligations.
Be aware that the typical confidentiality agreement is not an appropriate substitute for the collaboration agreement between the parties. In practice, we often come across relationships of parties for which only an NDA exists. Most NDAs, however, lack provisions on jointly developed intellectual property etc.
Research and development agreements are the right instrument if you provide or source research services or product/software development. They are not suitable to be used for the manufacturing, sale or supply of the product, which may follow upon the development. However, it may be advisable to already fix some key aspects of a potential supply agreement.
R&D agreements need careful drafting, not only for addressing intellectual property rights but also for various other reasons (such as “do you owe a result or just careful work”, default, warranties, liability, etc. ). From an intellectual property perspective, there need to be rules about existing technology (often referred to as “background”) and access to it as well as clauses on newly developed intellectual property (often referred to as “foreground”). On the foreground, topics such as ownerships, use rights, obligation to prosecute and maintenance of patents, cost etc. need to be addressed.
License agreements are concluded to grant use rights on intellectual property rights that you own. It is key to determine the scope of the license, for instance whether you grant a license to the patent or only for certain products, the geographical scope, whether sublicensing should be allowed, for how long the license lasts, etc.
In return, the remuneration (license fee, royalty) must be clearly defined and understood by both parties. Many disputes arise from unclear provisions pertaining to royalties.
Intellectual property rights can not only be licensed but also transferred to another party. Through an assignment agreement the owner of e.g. a patent transfers all of its rights related to such patent to the assignee which subsequently is the new owner of the right.
It is important to note that the transfer of IP rights requires the compliance with various formalities. Ultimately, the assignment will normally have to be registered with the relevant national authorities. These national authorities may have different requirements to a transfer of rights and often request various documents to ensure the validity of the assignment.
While patents can provide powerful protection for an invention, the costs involved with obtaining patent protection can be substantial and should therefore not be neglected. In this blog post the expenses which typically have to be expected are summarized on a high level to offer a realistic overview over the lifetime of a patent. It has to be kept in mind, that the provided information is based on our expertise and experience and may therefore be subject to significant variations, depending on the chosen strategy.
A patent is an Intellectual Property (IP) right granted for an invention. “Invention” in this context relates to a product, a process or an improvement thereof that provides a new way of doing something, or offers a new solution to a technical problem. A patent allows the owner to prevent others from using the protected invention for commercial purposes and to decide who is allowed to produce, sell or import the protected invention in those countries in which a patent is in force. In order to get patent protection, technical information about the invention must be disclosed to the public in a patent application. The protection provided by a patent usually lasts up to 20 years from the filing date of the patent application. After lapse of the patent, the invention becomes public domain and can be used by everyone.
There are various reasons why you may consider to apply for a patent. Samples thereof are:
While planning an IP strategy the business impact as well as the costs should be well considered in the budget as patents are usually too expensive when there is no equivalent business. In view of business decisions, this blog post aims to provide a brief overview of the typical costs involved with patenting an invention.
What will not be addressed in this blog post - but is at least equally important and should therefore be considered in each IP strategy - is the aspect of Freedom To Operate (FTO): Independent of filing patent applications to protect an invention, it is necessary to avoid collision between the products/processes brought to the marked and existing IP rights of others.
As with most questions, there is no definitive black-or-white answer but the truth resides in various shades of grey. There are various factors determining the cost of a patent, as outlined below.
Generally speaking, the costs involved with obtaining and maintaining a patent can be placed into three stages:
Realistic examples for the costs of stages 1 and 2, as well as stage 3 are given at the end of this blog.
It has to be emphasized that the first application lays the foundation for all subsequent proceedings and ultimately the protection. It should therefore be prepared as thoroughly and complete as possible, keeping in mind that, once the first application has been filed, no alterations (additions or deletions) can be made which affect the content of the application and one is limited to what was originally filed. The reason being, that changes made to the application after it is filed, which affect the original disclosure of the application, usually have an impact on the validity or the application date of the underlying patent application.
The expenses for the initial stage (first year):
Attorney’s Efforts and Official Fees – Total approx. costs 5k-15k CHF which include:
Comment: A patent application for a mechanical invention usually requires less effort to prepare than, for example, an invention in the fields of biology or chemistry. Additionally, within the respective areas, some inventions are more complex and more comprehensive than others, which typically translates into increased attorney fees as more time is require for different stages of patent prosecution, including drafting of the application. It also matters whether the aim of the application is to lay the base for a whole product family or if only a small improvement shall be protected. Efforts for protecting a new technology are usually significantly higher compared to those which occur when an improvement shall be protected.
The scope of protection is defined by the claims which are the most important part of a patent. Whether a patent with strong and therefore valuable patent claims is obtain or not depends on the results of the examination procedure. Depending on the strategy, the examination procedure typically lasts 3-5 years (it may be accelerated if necessary) and is based on and limited to what was originally filed (see stage 1 above).
During the prosecution of the patent application(s) costs mainly incur from one or several office actions which are dispatched by the patent examiner of the respective patent offices on a national/regional level. In order to achieve the best outcome in view of a strong patent it is necessary to:
The costs are greatly influenced by the following two factors:
Number of Office Actions/Timing: Usually 1-4 office actions are necessary until the patent application is granted or rejected. More difficult examination procedures require more office actions which lead to greater overall costs. Interesting information regarding the grant rate of a specific US-examiner can be retrieved here. After a reply to an office action has been filed it usually takes several months to more than a year until the next office action is received.
To be on the safe side, an average amount of 1k-3k CHF per office action should be taken into account.
Geographic Scope: The more jurisdictions are selected to seek patent protection in, (i.e. how many countries) the more costs will incur, as the official fees, as well as costs for local representatives and translations etc. must be taken into account.
After grant: It is still possible that after grant additional expenses occur, e.g. in the case that some files an opposition against grant of the patent.
After the grant of a patent the protection lasts up to 20 years from the application date of the original patent application. Provisional protection exists from the application date although the patent can be actively enforced only after grant of the respective patent.
In order to keep a patent alive in a country, annually occurring renewal fees have to be paid usually form the third and each subsequent year. These expenses vary depending on country and typically the fees increase during the lifetime of a patent. The total for renewals therefore strongly depends on the geographic scope in which patent protection is to be maintained. If the renewal fees are not timely paid for a specific state, the respective patent right lapses.
The following chart provides an overview of the official fees for five exemplary countries, as well as an estimation of the running total costs for the maintenance of the patents in those five countries (all amounts in kCHF) for the years 3 to 20:
Not covered by this blog are the costs for legal disputes. A patent claiming protection for a technology in a field of active competition can become subject of opposition proceedings after grant of the patent, wherein in most jurisdictions each party covers their attorney fees. Enforcing a patent in order to prevent a competitor from using or selling the protected invention may involve substantial costs as well.
Filing an international patent application according to the PCT and then entering into the national phase thereupon delays the decision in which countries to seek patent protection and the related costs by about 1.5 years compared to a direct filing in the desired jurisdictions. This time is often valuable in bringing a product to market and getting customers feedback in order to make a more informed decision about the desired geographic scope of protection.
The figure below shows a typical timeline, the main steps in the process of getting a patent and the costs involved by example of a Swiss startup protecting a medical device for consumers. The costs arise from attorney fees (solid bars) and third party fees like official fees, local representatives etc. (striped areas).
In the example above the cost of preparing and filing the priority founding application in Switzerland (CH, blue) in 2015 are shown. In 2016 the international application (PC, red) was filed 12 months after the Swiss priority application. After 30 months in 2017 the national phases were initiated in China (CN, green), the US (light blue) and in Europe (EP, violet) causing costs in filing fees in each respective country. Afterwards costs occur for handling of the office actions in process up to the grant of the patents.
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