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October 2, 2017

The UK Startup’s Guide to Communicating IP Strategy to US Investors

UK startups and scaleups seeking to raise capital from US investors need to anticipate how US investors view patents and other intellectual property. Every good investor pitch deck has an IP slide, and certain questions arise consistently. Below is a checklist of considerations to help reduce friction when communicating your company’s IP strategy.

Confirm the ownership paper trail

One of the first questions US investors ask is whether the company owns all its IP. US law on patent ownership differs materially from the law prevalent in the UK and throughout Europe, where inventions created in the course of the inventor’s work are owned by the company. Under US law, inventions are owned by the inventors themselves unless a written contract (such as an employee or consulting agreement) is signed by each inventor specifically assigning inventions to the company.

Patent or trade secret?

Investors in the US often take a holistic view of IP and recognize that not every innovation is suitable for patent protection, especially because patenting requires public disclosure. US trade secret law also is strong and recently was fortified by passage of the Defend Trade Secrets Act of 2016. Accordingly, evaluate each aspect of your technology to determine the best form or protection for each. Consider trade secret protection for “back-office” innovations in particular, where reverse engineering by your competitors would not be possible and detection of infringement by others would require special access.

Patent timing is everything

Make sure that the timing of your patent strategy is well-coordinated with your product development strategy and the life cycle of your product. Investors will want to know you have a plan.

The US offers provisional patent applications, which are temporary placeholders that can be updated during their one-year lifespan, but must be converted to non-provisional patent applications on their filing anniversary. Once converted, no updates or additions are permitted.

A US provisional patent application may be the right filing strategy for a nascent aspect of your technology, so long as it will be sufficiently developed within one year to allow complete documentation. Also, US patent law offers a one-year grace period not available in many other geographies, which can save some rights for prematurely disclosed inventions.

Leverage your UK/European patents

US investors typically will want to confirm that your worldwide patent strategy matches your business strategy and reflects a commonsense cost/benefit approach. Patents are territorial, but international IP treaties allow you to extend an application into the US if you act within one year of filing. The other direction also works, i.e., a US patent application can be extended into the UK on or before its one-year filing anniversary. 

Know when to sprint

For particularly valuable inventions with short life spans and obsolescence cycles, show that you have considered using the US Patent Office’s Track One Prioritized Exam program that allows patent applications to be examined under a dramatically accelerated timeline for an additional fee. Negotiation with the patent examiner starts just a few months after filing and you will receive a final answer on patentability within one year. Used strategically, the Track One Prioritized Exam program can make patent protection a viable option for technologies and products that otherwise would not be good fit.

Don’t dismiss design patents

Often overlooked is that US law offers cost-effective protection similar to industrial design protection in Europe. Like utility patent applications, design patent applications can be bi-directionally extended across the Atlantic, but the timeline to do so is six months rather than one year. This form of protection should be top-of-mind when the aesthetic or “look-and-feel” properties of an invention (e.g., a piece of hardware, a device, or a tool), are part of the value proposition. Importantly, US design patents also can be used to protect unique Graphic User Interfaces (GUIs).

Recognise that US patent law is in flux

US patent law is undergoing significant changes in critical areas in the wake of recent US judicial decisions, including what types of inventions are eligible for patenting. The ramifications at the US Patent Office are still unfolding; most affected are patents covering business method and software inventions, but all types of inventions are affected to some extent. Check with a US patent attorney at critical decision points to stay up to date on how these changes could impact your company’s IP current portfolio and future strategy.

Post produced in partnership with Daniel Glazer, Michael Hostetler, and Scott Burkette at Wilson Sonsini Goodrich & Rosati. Dan can be reached at daniel.glazer@wsgr.com, Mike at mhostetler@wsgr.com, and Scott at sburkette@wsgr.com.

The foregoing does not constitute legal advice and should not be relied upon for business or legal decisions.

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