For startups, intellectual property (IP) can appear to be a straightforward investment. However, the reality is that obtaining patents often unveils a series of unforeseen expenses. A simple patent application can escalate in cost, with estimates showing that a single U.S. patent could exceed $50,000 over its lifetime due to various fees, including legal and international filings, as well as annuities.

This leads many founders to question the value of patents. Yet, foregoing patent protection altogether can result in greater risks such as competitors securing valuable market positions, loss of investor interest due to a lack of clear IP strategy, or confronting legal disputes as the business gains momentum. Thus, the more pertinent question is not whether to pursue patenting, but rather how to do so effectively while managing costs. Below are some actionable strategies.

Prioritize High-Value Innovations

Startups often grapple with one of two significant pitfalls in patenting: under-patenting and over-patenting. Both can adversely affect a company’s financial health. Under-patenting occurs when innovations are not properly documented or protected, leading to missed opportunities. Without a structured process, like Invention Disclosure Forms (IDFs), valuable ideas may remain unpatented, particularly during crucial funding periods.

Conversely, over-patenting involves filing applications for innovations that do not enhance market position, leading to inefficient capital allocation. Innovation managers should thus focus on patents that secure revenue and effectively hinder competition. A structured patentability assessment incorporating input from R&D, management, and legal teams can evaluate innovations based on business relevance, patentability likelihood, and associated costs. A useful guideline is: if losing an idea wouldn’t impact your business significantly, it’s best not to pursue a patent.

Develop a Comprehensive IP Budget

Embarking on the patenting journey without a budget is akin to hiring employees without financial assurance for their salaries—it is unwise and can be detrimental. Startups rushing into patent applications may find themselves financially strained, leading to abandoned or lapsed patents.

The costs associated with patents unfold in various stages, including drafting, prosecution, and maintenance. Each patent can evolve into a family of filings, especially when considering foreign equivalents and continuation patents. Failing to account for these ongoing costs can lead to abandoning valuable patents after initial investments.

It is crucial to establish a patent budget before initiating any applications. This budget should encompass legal fees, future filings, and long-term maintenance costs. Engage in conversations with your attorney regarding fixed-fee structures to mitigate unexpected expenses. Tools for cost estimation can be beneficial for tracking impending expenses, ensuring that your financial strategy remains robust throughout the patenting process.

Implement Strategic Filing Techniques

Many startups attempt to reduce costs through misguided strategies, such as hastily preparing applications with overly broad or overly narrow claims. These shortcuts can lead to rejections and wasteful spending. Instead, embracing strategic filing decisions can yield better results.

Consider starting with a provisional patent, which involves a modest fee (around $140 in USPTO fees), and allows an additional year to enhance your invention before committing to a full application. Additionally, apply for government fee reductions, which can offer substantial savings (up to 75%) if you qualify as a small or micro-entity.

Delaying foreign filings can also result in significant financial relief. Domestic filings should be prioritized, using the PCT system to postpone international decisions by up to 30 months, giving you time to assess market potential.

Excessive costs can accumulate from challenging examinations, so utilizing predictive tools to avoid difficult technology sectors is advisable. Examine the history of your assigned examiner to gauge approval rates; if they have a low approval history, it may be worth requesting an interview or abandoning an application if prospects appear bleak.

Streamline Your Patent Portfolio

It’s commonplace for startups to spend a significant portion, sometimes 20% or more, of their patent budgets on patents that provide little ongoing value. If a patent fails to protect a crucial technology or doesn’t contribute to your competitive edge, consider eliminating it from your portfolio.

Regular portfolio reviews are essential to ensure alignment with business strategies. Assess each patent’s relevance annually—if it no longer fits, contemplate dropping it, selling, or licensing it to recover costs. Maintaining a lean, high-value patent portfolio tends to be far more effective than a bloated one.

Leverage Data-Driven Decision Making

The future of effective patenting lies in data analysis rather than guesswork. Tools that assess approval probabilities, predict total patenting costs, and uncover cost-saving avenues can guide you in deciding which patents to pursue and maintain.

Successful innovation managers don’t rely on luck; they actively track, analyze, and adapt their strategies. Adopting this approach can significantly enhance your chances of successful patenting and contribute to your startup’s overall success.