19 February 2016Jurisdiction reportsPaul Sutton

US: avoiding a startup patent catastrophe

Imagine two highly technically qualified inventors—tenured PhD professors at a major US university—who jointly conceive of a novel widget and method of manufacturing it. Over several months they consider and mull over what they honestly believe are revolutionary new concepts, and thereafter they borrow money from relatives and close friends to build a proof-of-concept pilot prototype at an unused laboratory in their university.

To the joy of these relatives and friends, the pilot prototype works extremely well and establishes without doubt that the inventions are viable. Everyone involved is pleased and excited at the commercial prospects of the inventors enjoying huge potential financial rewards.

The inventors, following their proof-of-concept success, set about seeking to improve on the efficiency of their concept in order to reduce the costs of production and implementation. This improvement effort extends over a 12-month period with additional successes. At that point, the inventors decide to protect their original concepts via patents, as well as the efficiency improvements achieved.

With further money from friends and relatives, they retain patent counsel with instructions to conduct a preliminary patentability search and, if the results are favourable, to file a provisional patent application covering their new widget and its unique method of manufacture.

Armed with a patent application, the inventors form a corporation under which to commercialise their product and seek and obtain enthusiastic equity investors who finance a production facility. A sizable inventory of widgets is produced and stockpiled.

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