Sunday, May 15, 2011

Funding Intellectual Property (IP) Protection in Early Stage Companies

Early stage companies face a number of dilemmas over which activities to fund.  Often, the drive to bring that new product (or service) to market consumes the lion’s share of the available funds.  However, often during early stage activities, much of the IP fundamental to the long-term well being of a company comes into being.  Then, a year later (if not earlier) when that fundamental IP faces potential statutory bars to patenting (see The First Three Things That Entrepreneurs Need To Know About Patents) the company finds itself without money to file their patent application(s).
This article suggests one way to avoid this dilemma: include IP protection activities in funding requests.  Few would hesitate to include line items for technology development, marketing efforts, raw materials, etc. in a funding pitch for angel investors or venture capitalists (VCs).  Yet, having sat through many angel pitches, VC competitions, and the like, this author has noted that few early stage companies include IP protection in their list of activities which they would like to fund. 
This seems odd because, if IP serves as a fundamental piece of a business (as it does in many tech-based companies), it seems that it ought to receive funding commensurate with its importance.  Indeed, after having interviewed a number of angels and VCs, the author is left with the impression that they expect early stage companies to protect their IP and to spend sufficient money to do so.  Therefore it makes sense to ask for funding to protect what might turn out to be the crown jewel of an eventual acquisition target: i.e. the technology developed over time by today’s start-up company. 
Moreover, most angels or VCs acting in their enlightened best interest will probably want the technology they fund protected.  We suggest asking for the funds to do so along with your other requests.
For more information about patents or the patenting process see or call us at (512) 897-0399.  We at the Villhard Patent Group would be happy to discuss this issue further with you.

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