If a patent is useful to defend against copying, it is also the key to securing R&D investments and raising funds. It is also an excellent way to gain visibility and to establish the seriousness and innovative character of the company. Today, however, only 15% of French startups file patents. According to Magali Touroude Pereira, Founder of YesMyPatent, it is therefore necessary to encourage startups to file patents for better chances of success.
L’National Institute of Industrial Property (INPI) published its study annual (1) on private companies filing patents. It covers patent applications published in 2016, and shows that small and medium-sized enterprises (SMEs) and medium-sized enterprises (MSEs) are increasingly filing patents, accounting for 29% of published patent applications. In its latest study, published on 19 April 2017, France Patents (2) estimates that startups with a patent portfolio are three times more likely to succeed in 10 years than others. In 2016, of the 3,465 French legal entities that have had at least one patent application published at the INPI, 1,993 are SMEs (companies with fewer than 250 employees), of which nearly half are very small companies (VSEs with 0 to 9 employees); 482 are ETIs (companies with 250 to 4,999 employees); and 605 are large companies (with more than 5,000 employees). This is not yet the case for start-ups ...
The patent: an indispensable tool against copying
It is not uncommon for an inventor to be dispossessed of his idea by a third party. This was the sad misadventure of Studio Banana, a Spanish startup which, after a successful fundraising campaign on KissKissBankBank.com to develop its Ostrich Pillow, saw its product copied and distributed on a large scale by a Chinese company. Without a patent, Studio Banana was unable to promote its invention or stop the marketing of these copies.
According to France Brevets, only 15% of French startups file a patent in their seed phase, compared to 23% for Germany, 22% for the United States and 22% for China. This is an effective means of combating counterfeiting.
Why then are so few patents registered in France? The filing of a patent represents a significant sum for these very young companies since it costs about 5,000 euros in the first year for European protection, to which an approximately equivalent amount must be added in the second year. And if you want international protection, the costs skyrocket.
The patent: knowing how to spend to earn more
It is therefore not surprising that startup companies prefer to invest their funds - which very often amount to only a few thousand euros - in the communication, marketing or commercialisation of their project and wait for a fund-raising event to take place before committing to this expense. But this is a mistake, and for several reasons. In addition to the fact that a disclosed or commercialized invention is no longer patentable, a strategy for protecting inventions, particularly by filing patents, is indispensable for raising funds. By securing the investment made in R&D against copying and by accrediting the value of the innovation, the patent gives a serious image to the company and reassures investors.
A patent is a company asset just as much as factories or production tools are in the traditional economy. Without a patent, and even if the invention is revolutionary, the startup will find it difficult to raise funds. Indeed, nothing will prove to the investor that once the product is on the market, a competitor will not commercialize a copy, which is cheaper since it does not have to bear the R&D costs, thus putting its investment at great risk. A risk that no investment fund is willing to take.
Increasing its visibility thanks to the patent
The patent is also an excellent communication tool. Indeed, it is a way to gain visibility since after 18 months patent applications are published in the Official Bulletin and accessible on many free databases, such as Espacenet or Google Patents. However, funds and large companies peel them for the purpose of acquiring capital or making an acquisition. According to a study by France Brevets, 30 % of start-ups that have filed at least one patent have either merged, been bought out or have successfully completed an IPO. A rate that drops to 8% for start-ups without industrial property rights. Holding a patent increases a startup's chances of success by a factor of three.
Patenting, yes, but by the book.
But beware, not all patents are equal. To be an asset, a patent must be of quality - an investor will always have a patent audit carried out by an industrial property consultancy firm before any investment - but it must also cover the main target markets and countries where counterfeiters are likely to operate. As soon as a company reaches an international market, the patent must therefore be filed at least in Europe, the United States and Asia. Here again, the price is substantial, since it can be as high as 100,000 euros or even more, depending on the complexity of the invention. It is therefore important to clearly identify these costs prior to raising funds because if an investor does not commit to a start-up without a patent, he will nevertheless take into account the costs of an international patent extension, which he will be ready to finance if he believes in the project.
Today, few engineering schools and universities provide training in industrial property. Yet patents are a major economic weapon. It allows to gain notoriety, to attract investors, partners and collaborators. The patent should not be perceived as a financial burden for the company but as a source of wealth, a bet on the future and a life insurance policy for the company's survival in the face of ever tougher and international competition. It is crucial to anticipate the strategy for protecting intellectual property, and in particular inventions, as soon as the startup is created, otherwise it may disappear before it has even had time to really exist.