Jeffrey Schox: How to Identify Inventions

Okay, the next section we're going to cover tonight is how to identify inventions and so effectively how to pick them within your own startup. What I've found over time is that there is a set of inventions that you could file on and there's a set of inventions that you should have filed. And the problem with the, hey, we filed on these, but we should not have is actually fairly costly. And it's costly because it wastes a ton of money. Patent applications, as I mentioned from beginning to end, are somewhere on the order of 20,000 to $40,000. And so filing on something that was no longer going to be valuable a few years from now, or had a very low chance of actually patentable could be an enormous waste of money. It's also a waste of time. We try to do our best at my law firm on keeping it very light and very easy to use with respect to our clients. We don't have our clients write anything. We actually just jump in for an hour and do a whiteboard session together. But it still takes time to capture that invention, and it still takes time to actually review a 40 page patent application. But possibly the worst thing that filing on an invention that you should not have is that it actually teaches your competitors exactly what you're doing. That is the definition. That is one of the major rules of a patent application is to teach someone how to make and use. The ones that you should have filed, but you didn't. Obviously, we're losing some kind of valuation and we're increasing some kind of vulnerabilities because we're not actually deterring the patent infringement lawsuits that we were hoping to, and we're not increasing the valuation like we were hoping to. So how do we, now that we know that this is a problem, how do we actually do this? There's kind of two ways. And Fortune 500 typically does it in a way that I would describe as bottoms up. It incentivizes engineers to identify their own inventions and to then inform managers and supervisors, hey, I have something here. This is pretty much how it works in all Fortune 500 companies. And sometimes they do this incentives through money. Hey, it's $1,000 if you fill out an invention disclosure form, it's $3,000 if we actually file a patent application on it, it's $5,000 if we get an issued patent on it. Sometimes it's kind of fame. You get to go shake the CEO's hand in some kind of quarterly meeting that you are the number one inventor at a company. There's a Lot of problems when you try to scale this down to a team of, say, 12 or a team of, say, four at a startup. And the problem generally is engineers have no idea what is actually patentable, and engineers typically have no idea where the company is going to. And the CTO might be too focused on the shiny object that she just created recently. And so it doesn't necessarily make sense to be able to treat it as like, hey, what is on your mind? And when startups come to me, I typically say, I know that you have some ideas on why you're approaching why we've actually had this meeting, but I want to just toss those all to the side for a moment. And we use what we call kind of the top down approach. And it's typically getting the CEO in the room, the CFO in the room, and the CTO in the room. And how this works is I look to the CEO and I say, how are you pitching your company? What are some of the things that you're using to differentiate your company from others in this space? Why are your customers super interested in what you're doing? Why are your investors interested in what you're doing? And this typically could come down to two or three things. These are now areas of differentiation. I would typically then turn to the CTO and say, great, we just now know that areas of differentiation. What are some of the technologies that actually support those differentiators? Not what do you think is patentable, not what did you come here to patent? Not what is the shiniest object in the room, but what are some of the technologies sexy or not sexy that are actually going to support those differentiators? Then I would turn to the CFO and say, all right, we've talked about the reasons why to build a patent portfolio. What's the budget that we have here? We've now identified 15 different areas of potential inventions. We have a budget of three. Great. Let's turn around now and figure out the three best inventions to actually file on. Given the differentiators and given the technologies and given the budget. I call this kind of a top down approach of being able to understand from the C suite what is actually important to a company and so that the patents actually match this long term, you think about the differentiators. Those differentiators typically don't change. And so we're hoping to file on inventions that are now going to be valuable to the company for the long run. It.