Now you have a patent, what are you going to do?
For many entrepreneurs, life goes on. The nasty secret is that now that they have this new asset, they don’t know what to do with it. They spent a lot of money, time, and energy getting the patent, but struggle with the value of it.
Getting a patent is a big accomplishment.
A patent shows the world that your idea is innovative and new – that no one in the history of the world has created anything like your idea.
Congratulations on getting that patent. It is a huge accomplishment and represents a lot of energy, money, and inventiveness.
But does that patent add commercial value?
After the Champagne corks have popped and the party winds down, after the press releases have gone out celebrating your accomplishment, after sending out investor letters extoling the company’s successes and bright future – what is the patent doing for you?
Your board should be asking “why do we have this patent?” and “what is our return on investment for this patent?”
Collateralizing Your Patent for a Loan
Patents can be collateralized for loans.
Borrowing against assets is non-dilutive, extending your company’s runway without having to go back to investors and selling off more equity. You keep more of your company, and you have a better chance for success.
Current investors like non-dilutive funding because they get their slice of a bigger pie.
Typical loans are $2M to 50M or more.
The loan process involves stress testing your patents to see if they can withstand litigation, as well as deeply analyzing the financials of your business – but this is just like getting any type of loan or other financing.
Insuring Your Patents
Every entrepreneur realizes that enforcing their patents will be difficult and expensive. Most entrepreneurs are (wisely) unwilling to bet-the-company on a patent enforcement lawsuit.
A typical patent lawsuit can run into the millions, but the worst part is that everything grinds to a halt because money needs to be diverted to fighting competitors (or dealing with patent trolls.)
Patent Insurance is affordable for startups.
Octane Fitness was a small startup who purchased patent insurance – and they are glad they did. Their lawsuit went to the Supreme Court – they lived through it – and they were acquired by Nautilus Fitness for $115M.
What does insurance cost? The real question should be what is the value – but the cost is typically 1-1.5%/year of insured value. A $1,000,000 policy will cost less than $1000/mo.
Financing Your Portfolio
Now that you have one patent, it is time to build a real portfolio.
Portfolio strategy is much different from just getting one or two patents – it is about building a meaningful asset base from which you can do outbound licensing of your technology – or a defensible hill from which you can dominate the marketplace.
Portfolios cost money, but also require a different strategy than that first patent of a company.
Portfolios are built by thinking through the competitive landscape, anticipating competitor’s moves, and building strategic negotiating assets. Also, a patent portfolio will clear out some terrain so that you will have room to maneuver in your marketplace.
Patents at this level start moving away from single points of attack to a broad set of negotiating positions. Large companies have huge portfolios purely for “trading” with other companies as part of inter-company negotiations, joint ventures, partnerships, supplier agreements, and many other types of conflicts or partnerships.
BlueIron finances patent portfolios.
BlueIron pays all the patent costs, including attorney’s fees and patent office filing fees. Typically, we also pay to expedite patents using Patent Prosecution Highway (NOT Track One) with a goal of getting patentable assets within a year.
When we are building portfolios, we are also building assets strong enough to collateralize as a patent loan.