How Much Should Startups Spent on Patent Protection?

Caldwell Video Series – Part III

Joining Keegan are the following Caldwell clients:

Tom O’Leary, Team Member at BETA Technologies

Jay Jacobs, Founder of RAPID and co-Founder of paperlessPARTS

Karl Ruping, Managing Partner at incTANK Ventures

Cyrus Schenck, CEO & Founder of RENOUN

(Transcript for panel discussion below)

>>KEEGAN M. CALDWELL:

I want to follow up, Karl, you brought up another important issue, I think, that young companies deal with, and, that’s a question that I get… I don’t know, well, I don’t get it so much but I hear other people discussing it you know, people don’t generally ask me this question:

How much do you spend?

What do you spend when it comes to patent protection, and, how much should we really be putting towards this? I’ve got five dollars, should I spend three? How do you know? Do you want to say anything about that?

>> KARL RUPING:

Absolutely, and, I think it’s a critical question also for the investor, right. Because you’re putting in your money, and I’m asking the teams, what are you using that money for? Of course, expanding HR, yes, getting a lab set up, yes, IP, yes. But you know, there’s limited resources. So, I think it’s a case-by-case basis. Not an easy answer, right? But, it really is a case-by-case basis:

Where are you?

What are the assets that you have now?

What are the IP strategies that you need now or in the future?

And, another element here is time of course. First-to-file, that’s where we are today, but, you might want to take a bit of a risk, throw in a provisional and you’ve got 12 months you go backtrack, “What can I do in 12-months-time to get enough to fill that in?” It’s also timing and when do you raise Series B, so that you can really scale that up, and also, shout out to the patent attorneys in the room, negotiating with your patent law firm and saying, “Listen, I really want to get these provisionals done. Can we do it?” Let’s just do it dirty, right, get these in, do the best we can, and work with your patent attorney to, you know, delay invoices for a little bit. Of course, attorneys in general, are not your investors, but, it’s a teamwork too. And so, it’s part of the conversation.

>> CYRUS SCHENK:

Just for reference, as far as: How much do you spend? This is whatever the case should be, but, we spent more money on IP for the first three years than any other single thing, including material costs. And building skis is not cheap, so, it was a hard, hard pill to swallow there was at least one investors check, the entire check just went through my bank account and out to file for IP.

So, it’s in that case, like, yeah, we, in our particular business, we’ve realized that (IP) really was going to be the lifeblood, and that’s why that check went straight to IP. It’s not always been the case, you know, obviously, there’s times to, you know, sprinkle a bunch of provisionals out there and just have them sit for 12 months, to give yourself a little more runway, certainly, other times there’s definitely not.

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