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Five Tips for Identifying Value in a Providsional Patent Application (PPA)

Five Tips for Identifying Value in a Providsional Patent Application (PPA)

Venture Capitalists (VCs) like Intellectual Property (IP) but see very little of it. Most entrepreneurs seeking funding file a provisional patent application so they can tell one or more VCs they have some IP. Since VCs typically don’t have legal expertise, they usually don’t take a closer look at these provisional applications (PPA). However, VCs are entitled to ask for quality IP.

magnifier graphicHere is a list of five things to focus on in a provisional patent application to get a rough idea of its potential value. Both inventors and VCs should focus on these points when preparing/reviewing a PPA as indicators of potential value.

1)            Are there claims? This is a yes or no question. “Yes” means the inventor made an effort to define their idea as an invention. “No” means they did not make the effort. If they did not make the effort, one might ask why.

2)            Who do you sue? This is difficult (but not impossible) to answer if there are no claims. If there are claims, ask if everything in the claim is likely to be done by a single party. The answer must be yes for an infringement lawsuit to be possible. Since IP derives its value from the potential to sue, this is a critical point in estimating potential value.

3)            Is there a real world effect? We live in a world where a “telephone” is actually a technological Swiss army knife. A lot of the features though are purely software. Once the application is installed, the phone acquires new capabilities. While cool apps have great business potential, they are difficult to patent. Software per se has always been un-patentable. The most reliable way around this is to show that the software, when run on the device, has a real world effect. One type of real world effect is that the software improves performance of the machine on which it is running (e.g. makes it run faster, cooler or more reliably or extends battery life). Another type of real world effect is control of a non-computer component. Demonstration of a real world effect can be the key to convincing the patent office that the invention is in a field which can be patented. If you cannot convince them, there will be no patent and therefore no value from the IP.

4)            Does the invention go beyond business? This is a corollary to (3). The patent office does not believe that accounting functions like billing are “real world effects”. If the description of the invention focuses on business related activities it is difficult to convince the patent office that the invention is in a field which can be patented. Again, if you cannot convince them, there will be no patent and therefore no value from the IP.

5)            Did you say “Wow!” when you read the application? The patent office searches computerized databases to find publications on related technology. For the initial evaluation, it is sufficient to use your gut reaction. If you read the application and said “So what?” there is no breakthrough described. If you said “Wow!” you perceive a breakthrough. The casual reader’s impression of a breakthrough is not a guarantee that the patent office will feel the requirements for getting a patent have been met, but if the casual reader cannot see a breakthrough, the patent office almost certainly will not. That means no “Wow!” probably no patent and probably no value from IP.

Items (1) and (2) in the list relate to evaluating the approach the entrepreneur takes to IP portfolio development. Those that don’t put much into it are unlikely to get a lot out of it. Items (3) and (4) relate to an understanding of the rules for what is potentially patentable. Unfortunately, a lot of potentially valuable product ideas are simply not eligible for patent protection. Investors in technologies that are deficient with respect to items (3) and (4) need to develop a plan for holding on to market share that does not rely on the exclusivity provided by patent protection. Development of brand recognition is the obvious choice here. Item (5) relates to an instinctive evaluation of the legal requirement that an invention be new and non-obvious to be patentable. Again, if it seems unlikely that the application will become a granted patent, branding is an appropriate alternative.

 

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