Patents Are Important to Startups

Patents are important to startups because they provide a legally sanctioned monopoly that bars entry to competitors. In addition, patents may serve defensive purposes in that competitors may be less likely to sue a startup for patent infringement if there is a risk of a countersuit. Further, a startup can use the term “patent pending” in advertising with respect to its product or service, which may attract investment, increase valuation and deter competitors.

However, patents are territorial. For example, a U.S. patent is only effective in the United States. For startups that are planning to expand internationally or worried about foreign competition, foreign patents are a must, but they are also expensive. Foreign patents require translation fees, foreign attorneys’ fees and foreign patent office filing fees.

Fortunately, there is a low-cost option available in many countries. The utility model (not to be confused with a U.S. utility patent) is available in Germany, Japan, China, Korea, Russia and other jurisdictions in the Americas, Africa, Europe and Asia.

The main reason for the lower cost of the utility model is that it is not examined for patentability. Accordingly, there are no associated attorneys’ fees, filing fees, translation fees, etc. for responding to rejections from foreign patent offices as you would have with a conventional patent application. Further, because there is no substantive examination, a utility model is usually granted quickly. In China, a utility model will usually be granted within less than a year, whereas a patent can take approximately 27 months in the U.S. Patent and Trademark Office (USPTO)[1] and a similar amount of time in the State Intellectual Property Office (SIPO) of China.

Assuming cost isn’t a major factor, some countries will let you apply for both a utility model and a conventional patent for the same invention. This gives you the advantage of getting a utility model granted quickly while your conventional patent application is pending. For example, in China, you can apply for both a utility model and an invention patent application simultaneously for the same invention. Your utility model will most likely be granted within a year while your invention patent application undergoes examination. Accordingly, you will obtain intellectual property protection in China very quickly and retain this fallback protection in case your invention patent application does not get approved.

Please note that there are downsides for opting for a utility model and therefore this type of protection may not be for everyone. First, a utility model often has a shorter term than a conventional patent. For example, in China, a utility model has a term of only 10 years from the date of filing versus 20 years for patents. However, if your technology changes quickly, a utility model’s limited lifespan may not be a factor. Second, a utility model may be limited to only certain technologies. For example, in China, a utility model may only be granted for “products.” Accordingly, software, chemicals, methods, etc. are not patentable via a Chinese utility model and therefore a utility model may be more ideal for mechanical devices.

[1] See http://www.uspto.gov/dashboards/patents/main.dashxml for the most recent statistics.