Wednesday, July 22, 2020

On Patents & IP in the Middle East: To Patent or Not to Patent

The “idea” can often be the most precious asset to a startup founder at the early stages. Many Middle Eastern startups worry about sharing their “idea” for fear of having it “stolen”. Most eventually grow out of this fear and come to accept that the “idea” is a relatively small factor in the overall success or failure of their company. Yet in some cases, the “idea” plays a much bigger role; the “idea” is the cornerstone of the business. In these cases, we would be looking at inventions with the startup being a way of commercializing the inventions. 

An example of a company created to commercialize an invention is Velcro, where we see a global organization built to promote and exploit an invention. Other startups create inventions along the way, Uber started out as a ride-hailing service, but wound up building a patent portfolio around geolocation, security, autonomous vehicles and a whole range of other related fields. In all cases, inventions are the intellectual property (IP) of a business and just like any asset in a business, IP can be highly valuable or of minimal value, it can be a tool to help the business grow and defend its position, or it can be a time consuming and costly process with little return. So how do you decide whether to patent or not to patent and should you finally decide to patent your invention, how and where should you do it?

In this article, I will be examining some aspects of IP, focusing on helping Middle Eastern startups navigate the topic. I will be drawing on my own prior experiences as CEO of a tech company as well as issues I dealt with managing IP disputes for others. 

Is this an invention or not? The answer to this question requires starting with what is known as “patent search”. Whenever I hear a startup pitch that contains expressions such as “invention” or “unique” product, design, or method, I go to Google Patents or other similar patent databases and search for patents in the general market area. This could be on the design of specific IoT devices, use of gamification for certain applications, new material for clothing, or some method for separating waste or enhancing texts or faces in pictures. The initial search usually leads to more questions and as with most online searches, one can dig deeper and deeper. Patent Search is a service offered by specialists; my fundamental advice is to review what is out there already, and several online sources help with the concept of patent search. 

Can an invention be patented? IP is often associated with patents, yet IP may be protected by other means such as copyright. In many cases, it is impossible to succeed in a patent application for an invention that is mainly software, but software copyright can offer some protection. This article here addresses copyright registration to maximize the protection of software. While the vast majority of software inventions can’t be patented, certain algorithms and conceptual approaches to workflow may be patented.

Should it be patented? In some cases, an invention can be patented, but this entails full disclosure of the “secret sauce”. In my previous company, my cofounder invented a highly cost-effective method for making RFID cards, which entailed the use of a certain chemical compound used in the fashion industry. We debated long and hard to patent or not patent! To patent means that we disclose our secret sauce. Not to patent means competitors can potentially reverse engineer what we did and discover our methodology, but we would have had the advantage of time. We ended up pursuing a patent. Sometimes a patent is not necessarily the best way to protect valuable IP; total secrecy might be better. 

Patents as defensive v. offensive weapons! In certain areas of technology, we find a high concentration of patents. In my world of security and identification technology, particularly issues related to RFID (Radio-frequency identification), and NFC (Near-field communication) both are used to facilitate identification and communication between  devices, patents were as much a defensive strategy as they were offensive. Defensive strategy means a company has the “freedom to operate” and offer its products and services without being accused of infringing some other company’s patents.  Building a product based on a patented technology can help in arguing that such a product is innovative and does not infringe other patents.. It can also be used as an offensive weapon against any potential infringements, preventing others from offering similar products and thus offering the advantage of exclusivity.

Where to file? The knee jerk reaction is the US because it is the country typically associated with the largest market and most generous infringement awards. Also, the US patent office tends to be more willing to grant a broader scope for inventions than most European patent authorities. But pursuing patents in the US can be lengthy and expensive. So the answer may well be to apply for a patent in Egypt or Saudi Arabia, especially if you see that the tech area has significant patent activity and if you are not pursuing the US market. In some cases, the main motive is defensive, to be free to operate without the threat of infringing others’ IP;  the least expensive and the fastest option maybe best. In cases where the main motive is offensive, the US or Europe might be better options. 

Are patents useful in raising funds? Yes and no! YES because they offer investors some tangible evidence of the founder’s technical strength and innovation. Moreover, with many Middle Eastern startups seeking tech company valuations while not actually being tech companies, patents help in offering differentiation in the “startup marketplace”. But the answer can also be NO: because patents consume a lot of costs and startups that are excessively patent focused may find it hard to pivot. Some would forgo more optimal solutions in favor of utilizing their patent and wind up in the dilemma of “a solution waiting for a problem”. Investing in a company with an IP portfolio typically elevates the level of due diligence and discussions, which may help or hinder in raising funds. 

In conclusion, IP is just like every other asset of a startup business;  it needs to be a tool of the business and protecting it needs to be aligned with the goals of that business.

(This article first appeared here on Waya