Legal Risks Mitigation strategies for a Startup
Patent Infringement
Not All startups file patents, however each one should absolutely still plan to be sued. The inevitability of litigation in corporate America cannot be over-stated. To that, here are a few common sense steps each start up can take to be prepared esp. for startups that might not have any patents to file with their MVP. This means that the only patent or IP infringement risk that they need to plan for is the risk of infringing someone else’s IP.
- Identify a law firm
Depending on the stage of the startup, the process of finding the right law firm is going to be very different. A well funded and VC backed startup would be able to hire an experienced US based law firm experienced in IP & Patent laws. However, for a nascent startup with limited funding, identifying a law firm can be challenging because. It is important to know that now startups can also look for IP/Patent related legal advice from non-US based law firms with knowledgeable but inexpensive lawyers in cheaper third world countries practicing US IP & Patent laws. The advantage is that they can help a startup get started without worrying too much about costs however, the disadvantage is that this would not a long-term solution, as most VCs would expect the startup to have a US-based law firm to represent them.
2. Getting clearance before product launch
Until a product is in Beta and/or non-revenue generating, there is no risk of patent litigation as there is little to no money to be made from litigation. So before the product is launched, to mitigate any IP litigation risks, the best mitigation strategy is to do a thorough patent discovery. The startup should plan to spend time themselves as well as use the Law firm identified above to uncover any patents that might match with their product’s design. If one can rule out any infringement and get a clearance from the lawyers, one would have a much better chance of success not only in the marketplace but also against any potential “patent trolls”.
3. Mitigation strategy if patent infringement is discovered
The biggest advantage of the above patent discovery process is to make sure that pre-launch one can decide how to approach any infringements that might have been discovered. There are three clear ways to approach any identified infringements; first is to redesign the product so as not to infringe the patent anymore. However if that is not possible (if the product is ready, redesign might be very expensive), then the second option is to try to license the IP at favorable terms. This is a defensive strategy that assumes that the patent holder is looking to license the technology and not to commercialize it themselves. Lastly, if licensing is not possible or favorable, or when being defensive is not an option, then one should take the aggressive approach to try to invalidate the patent. The Supreme Court’s decision in Alice Vs CLS Bank, has made it possible to easily invalidate most software patents that are based on abstract ideas or just computerizing an existing business process.
Hope this quick guide helps budding entrepreneurs to effectively plan for IP infringement risks.
