Good patents are expensive - bad ones are even worse
Only 5% of patents result in growth for their owners. How do you know if yours is one of them?
You know you've got good idea - and those ideas need protection - but patents are expensive. And your investors need to see returns.
BlueIron finances new and pending patents using the IP as collateral.
We have skin in the game.
When we provide financing, the value of your IP is your only collateral. That means we're as invested in your patents as you are. So your getting much more than financing; you're getting the expert advice you need to have the strongest patents possible.
How It Works
We pay all of your patent costs, including attorney's fees and filing fees, allowing you to focus your capital on the rest of your startup. You don't have to take the risk of your patent even getting through the Patent Office - we will. And you don't have to worry that your patent is worthless - we'll ensure it.
You pay for the patent only when the patent issues.
- Schedule a phone call with us to discuss your situation.
- We'll finance your existing and future patents.
- We'll help you build a portfolio of Investment-Grade Patents.
- Your startup will be worth more -and you will be able to defend it.
Why use BlueIron's patent financing?
You know you have good ideas, and that your startup needs to protect them. But filing a patent is expensive, and never guarantees that you'll ever see a return on that investment.
BlueIron is different. We put our money where our mouth is by investing in your ideas. Unlike conventional patent attorneys, we're not just looking to spin out another patent and collect payment. We're looking to come alongside you and make your patents the best they can be.
This unique model means we don't take on just anyone; we only do patents that have real commercial value. That also means you'll always get the honest truth from us.
Learn more about BlueIron's methodology in Russ Krajec's book, "Investing In Patents."
What You Get
- $500,000 of patent enforcement insurance, paid for by BlueIron.
- Flexibility to use your cash to build your business, not pay patent attorneys.
- Expert advice using BlueIron's world-class IP experience.
- Confidence that every patent will be Investment Grade.
- Assurance for your investors that the IP is professionally managed and commercially valuable.
- BlueIron's skin in the game.
Frequently Asked Questions
Our due diligence reports are highly respected by investors.
BlueIron’s due diligence process not only evaluates patentability, but also enforcability, the economic advantage of the invention, its value to the startup’s market, as well as its value to competitors. Solid business value is REQUIRED before BlueIron can finance the invention, and BlueIron’s due diligence reports puts investor’s minds at ease about their investment.
BlueIron’s financing ensures that we have “skin in the game.” We succeed only if the patents are valuable and when your company is successful. Investors understand an “alignment of interests.”
The buyout cost for a patent is set up front and will not change.
The buyout is NOT a percentage of patent value, revenue, or any other measure. We do not take warrants, “success fees,” or any type of carry.
Our job is to build Investment Grade Patents for you, not become a tax on your success.
Typically, the total price for a patent will be defined at the beginning of an engagement. If you need to buyout the patent after it is filed but before the examination begins, the buyout price is 1/3 of the total price. If you choose to buyout the patent after examination begins but before allowance, the buyout price is 2/3 of the total price.
Financially, a startup’s cost of capital is extremely high – especially at the beginning – so every dollar needs to be spent wisely. Leasing or renting assets is much more capital efficient.
Most startup companies lease office space and even lease furniture through a coworking space. They lease computer services through Amazon Web Services and Microsoft Azure. Virtually all of the tools they use are SaaS or other “leasing” type models.
The reason why leasing or renting is attractive is two fold:
- Leasing an asset means you do not have to pay for it up front.
- Leasing an asset means someone else takes care of building and maintaining the asset.
When you consider a startup company’s cost of capital, BlueIron’s financing is actually cheaper on a Net Present Value of money basis.
The big benefit of “leasing your patents” is that BlueIron is perfectly aligned with your business. We need to create good, solid assets and will only do so when there is a business reason. You will never get the feeling that you are asking the barber if you need a haircut.
Just like leasing a car, you have full CONTROL of the IP assets without having to pay the full price up front.
Because you have an exclusive license, you – and only you – decide how to use the patent assets. You can enforce, license, sublicense, cross license, or sell your business assets. BlueIron has no veto power and no say in how you run your business.
BlueIron provides Patent Enforcement Insurance with every patent finance agreement. This means you have pre-paid legal fees ready and waiting to assert the patents against infringers. We do not want you to fail to enforce the assets just because of lack of money.
The legal structure is a convertible note, lease-back structure. The IP assets are held in a Special Purpose Vehicle (SPV), which is how virtually all of the Fortune 500 companies hold their IP.
The SPV grants an exclusive license to the startup with a buyout option. The startup can exercise the buyout option at any time.
Sometimes, BlueIron has held patents for 3, 6, or 12 months and the company exercises their buyout option. In other cases, the startup has a high cost of capital and it makes sense for them to pay over time.
The convertible note aspect of financing means the startup has an option to convert BlueIron to equity.
Your patent attorney is probably a good, well-meaning person who wants to do the right thing, but they have some inherent problems that prevent them from giving you good advice.
The conventional patent attorney has two duties to their clients: a fiduciary relationship and an agency relationship.
In a fiduciary relationship, the attorney is required to give good advice. If the attorney gives bad advice, they can be sued for malpractice. So what do most attorneys do? They make you decide.
Attorneys are taught to explain all the options and make you decide which one is best for you. Have you ever noticed that your attorney is always reluctant to tell you which is the best option? This is because they don’t want to get sued if you have regrets down the line.
The other side benefit of explaining all the options: the attorney gets to bill you for all the time spent explaining all the nuances. (It also makes them look really smart.)
In the agency relationship, the attorney is required to do whatever you want, provided it does not violate the law. If you want a patent on a perpetual motion machine, the attorney must write it up and send it to the patent office – no matter if the invention is completely worthless, and no matter if the attorney knows the patent office will reject it.
Never ask the barber if you need a haircut.
The attorney has an inherent conflict of interest. They need to get paid. It may look like they are selling patents, but they are really selling hours. The more hours they can sell you, the better off they are.
Think about the liability aspects of giving advice to a patent client.
If a client comes with a terrible invention and the patent attorney knows it, the patent attorney may suggest that they file a patent application anyway. If the attorney is wrong and the client sues because of the bad advice, the attorney is liable for the cost of getting a patent. The US average cost for a patent is about $60K, which is well within the attorney’s malpractice insurance coverage.
If a client comes with an invention and the attorney says do NOT get a patent, and it turns out that the advice was wrong, what is the liability exposure? The client could sue the attorney for all their lost profits – in every country of the world – for the next 17 years.
The attorney’s exposure to bad advice in this case is absolutely unbounded.
This is one reason why BlueIron does a lease-back arrangement. With this arrangement, we eliminate the conflict of interest and put BlueIron’s objective exactly aligned with yours.
BlueIron is taking several risks when financing a patent.
BlueIron is taking the risk that the patent will even issue.
BlueIron is making an investment in researching the invention, writing the patent, and getting the patent through the patent office. If BlueIron fails to get a patent, you can walk away from the deal at any time, and BlueIron loses its investment.
BlueIron is taking the risk that the patent will have value.
BlueIron is also assuming the risk that the patent will be valuable. If you walk away from the deal, BlueIron is left holding the patent and will need to liquidate the patent. We will probably try to sell the asset to someone in the field, auction off the asset, or try to find someone who might license the asset.
Why is it important that BlueIron assume these risks?
As a company who has intellectual property, you need to rely on those assets when you are making business decisions. A conventional patent attorney cannot really tell you the truth about your patents. They have an inherent conflict of interest: don’t ask the barber if you need a haircut.
By taking ownership of the patents and leasing them back, BlueIron has the exact same interest as you do: solid, investment-grade patents.
With every BlueIron patent financing program, you always have a buyout option.
The buyout option allows you to buyout BlueIron at a predetermined price at any time. Some people exercise the buyout after three months, some at three years, and some people choose to keep paying.
The buyout option is at a predefined price. You will know exactly what the buyout price will be at any time. We do NOT take a percentage of the “value” of the asset or anything like that.
BlueIron’s patent financing is based on financing the cost of a patent at about a 15% interest rate. This is a little cheaper than credit card financing, but much cheaper than angel or venture financing. As you probably know, angel or VC financing is equivalent to 50% or more per year.
By financing the patents with BlueIron, you are spending less money up front, but BlueIron is taking the risk that the patents are valuable.
BlueIron can get a US patent as quickly as six months or less in some cases. However, many times it takes 3 to 5 years.
How do we do it?
BlueIron’s founder, Russ Krajec, had the opportunity to join a startup company where we needed patent assets as fast as possible. In that startup, he was able to experiment with 100 patent applications to find the best way.
The answer: the Patent Prosecution Highway in the US. Using the PCT/PPH, Russ was able to get patents issued in the US within 4-8 months very consistently.
One key to expediting a patent is proper preparation. A patent search is critical to understand the landscape and to make sure that the claims are appropriate: not too broad but directed at an economically valuable invention.
Another key is the right strategy. The USPTO has a program called “Track One” which has several pitfalls, but it costs about the same as a PCT application. It is the PCT application which gets you on the Patent Prosecution Highway, which is much better than Track One. Feel free to give us a call and we can talk about the differences.
The “lease-back” structure is the same as almost all large Fortune 500 companies do with their patents: the patents are in a holding company but the operating company has full control of them.
You don’t purchase an office building when you need office space, do you? No. You lease space from a landlord. The landlord puts up the capital, furnishes the space, and provides all the amenities. Buying the office building outright is a waste of capital for a startup company. This is the same with BlueIron.
BlueIron does the patents on a “lease-back” arrangement. We build the patents to order, and you pay rent on them. You always have a buyout option that can be exercised at any time.
You have full control of your patents while BlueIron finances them. However, just like having a landlord for your office space, BlueIron “owns” the patents.
There is a difference between control and “ownership.” BlueIron “owns” the patents, but you control them.
Having control of the patents means that you get all the benefits of owning the patents without having to pay for them up front. You get to enforce the patents, cross-license the patents, and can even sell your rights to the patents.
BlueIron provides at least $500K of patent enforcement insurance for your patents, so that you always have dry powder to use those patents as you see fit.
Even though BlueIron provides the patents and insurance to use them, you are in complete control of how – and if – you choose to use the patents.
Partner with someone who's invested in your success.
Your patents only have value if you are successful in bringing a profitable product to market. If the product fails in the marketplace, the patents are likely worthless. Since that is our only collateral, we're literally in the business of making your startup successful. BlueIron’s interests are perfectly aligned with your’s.