Registration of patents - is it worth it?

Anina Groh
Anina Groh

Many young companies in the technology sector are faced with the question of whether they should apply for a patent for a technical development. The costs for patent protection are usually very high for young companies. In which cases is it worthwhile to apply for a patent and what are the alternatives?

Initial situation

A company in the technology sector usually differentiates itself from the competition by its own technological development. The question arises how the company can efficiently protect its technology.

The legal landscape offers patent protection for technological developments as one of the intellectual property rights ("IP"). A patent can be registered for new and innovative technical developments. The decisive factor is that the technology in question 1) is new compared to known and published technologies, and 2) that it has a certain innovative added value compared to known technologies, the so-called "inventive step".

If these basic requirements are met, i.e. if it can be assumed that a technology is new and innovative, a company should include patent protection in its shortlist.

Advantages and disadvantages of a patent application

While cost is probably the biggest disadvantage of a patent, the biggest advantage of patent protection is the good protection mechanism. A patent is absolute, i.e. valid against any third party. No one may use the patent applied for by your company without your consent. In practice, a very solid patent specification is therefore extremely essential, and what it says determines the scope of protection.

A patent application can offer a further advantage when potential investors check the quality of a company (keyword "due diligence"). A solid patent portfolio is often considered an important criterion by investors. Depending on the industry and especially in the business-to-business sector, it can also be a quality criterion if a company has secured its technology through patents.

The biggest disadvantage of patents is the cost. Patent applications and the maintenance of patents are relatively expensive. In a first phase, a patent attorney must first be commissioned to prepare the patent specification. If you decide to apply, you should not save time or money at this point, because the patent specification is essential for the protection of your technology. Several thousand francs should be expected for this step.

In the second step, the patent office charges fees for filing the patent. These also range in the region of several thousand Swiss francs, depending on where the first application is made and the type of review requested.

A patent becomes really expensive from 30 months after the first application, because from this point on the patent must be maintained separately in each country (so-called nationalization). Depending on how many countries a company wants to enjoy patent protection in, the costs are correspondingly higher or lower.

A further disadvantage of a patent application is the uncertainty of whether the patent can be registered. In the worse case, a patent application is not considered to be registrable by the respective patent office (because it is not new, not innovative or neither) and the patent expires accordingly. Patent applications that are filed for more than 18 months will be published. This means that your patent specification may have been published, after which the patent expires and your technology is then available to the public and can be used by anyone.

Alternative "know-how protection"

The alternative to a patent application is a so-called "know-how protection" strategy. "Knowhow" means knowledge or, in this context, the technological knowledge that has been developed in a company. As long as this knowledge has not been disclosed to anyone outside the company, it is basically possible to protect the knowledge from use by third parties even without a patent application, by consistently keeping this knowledge secret as a company. Probably the best known example of such a so-called know-how protection strategy is the recipe for the beverage Coca-Cola.

However, effective secrecy is not so easy to achieve. First, the employees involved must sign confidentiality agreements and it must be ensured that they adhere to them. The best way to achieve this is through appropriate incentives (e.g. employee participation in the company's success). Then a strategy must be developed for the company's processes to ensure that the full extent of the know-how is rarely visible. There is no generally valid strategy for this, but it must be developed according to the context of the company and the know-how.

The advantages of a know-how protection strategy are that there are no costs for registration and maintenance as with a patent. In addition, patent protection is limited to 20 years, whereas know-how - at least in theory - can be kept secret indefinitely. Moreover, know-how protection is automatically given worldwide, whereas patents only offer protection where they are registered (and paid for).

Depending on the industry, the know-how protection strategy can also make sense if it is feared that the competition will copy your patent despite a patent application and your company does not have or does not want to spend the financial means to enforce the patent claims (e.g. abroad).

The biggest problem with the protection of know-how is that protection can only be achieved through factual protection mechanisms and contractual agreements. Once the know-how has been made public (by whatever means), it can be freely used by uninvolved third parties.

A further problem of know-how protection is the licensability. As soon as you want to license your know-how to a third party, you can agree to a contractual non-disclosure agreement, but there is a de facto risk that your know-how will become public and thus freely accessible.

Last but not least, you should consider how "easily" your technology can be traced back to a product (so-called "re-engineering"). If competitors can relatively easily deduce the secret manufacturing process or the secret composition of your product, know-how protection is not suitable because the competition will quickly "get behind their secret".

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