Legal Expert Seminar Recap: Patents + Valuation featuring Dr. Steven Colby

The live webinar hosted by ProVentures in June 2024 encouraged visits to ProVentures.org for upcoming events and to follow ProVentures on LinkedIn.

Steven Colby, JD, Ph.D. , an IP expert from Silicon Valley, discussed patents, valuation, and funding. His goal was to help create more value for companies using IP. He began by addressing the common question, "What are my patents worth?" He compared patent value to personal relationships, stating it was subjective and depended on context, similar to how the worth of Monopoly properties varied based on the game's stage and other assets owned. In business, a patent's value was highly dependent on how well it fit the business model and its relevance to customers. To derive value, the patent had to become valuable in practice. Dr. Colby delved further into this topic later in the webinar.

The key to a valuable patent strategy is focusing on marketing and sales rather than just engineering innovations.

Here's the recap:

The value of patents depends on various factors such as their relation to your business and competitors' actions. A better question than "What are my patents worth?" is why a cash-limited startup should invest in a patent portfolio. The reason is for valuation and funding. As a patent attorney, the goal is to enhance your company's value during funding rounds and at the exit, which is crucial for financial success.

A good patent strategy is essential, tying it to building company valuation. Patent attorneys should focus on what to patent to make them valuable. Successful exits often involve strong IP portfolios, which can lead to better outcomes, including higher acquisition offers. For example, startups with robust patent portfolios can attract significantly better deals compared to those without.

The key to a valuable patent strategy is focusing on marketing and sales rather than just engineering innovations. Patents should cover features that customers desire, providing a monopoly on those features. The strategy should be product-driven, ensuring patents align with current and future product roadmaps. Presenting a strong patent portfolio to investors can significantly boost valuation, demonstrating the unique and protected aspects of your products. This approach can lead to better terms and higher funding amounts during investment rounds.

Make your IP more than just a checkbox for investors.

Instead of merely having an IP program, develop a portfolio that directly relates to your business's value. This approach can lead to a fantastic exit. For later funding rounds, creating a cluster map that shows the relationship between key features and patents can enhance investor perception of your IP portfolio's value.

For instance, a client in image processing used a cluster map to highlight their unique features, significantly boosting their perceived value during fundraising. A strong patent portfolio, aligned with product and market strategies, can lead to higher valuations.

Other types of IP, such as copyrights, trademarks, and trade secrets, are also valuable. Trade secrets, when documented and protected, can significantly add to a company's value. Patents, however, are often the most impactful for increasing valuation.

A good IP strategy includes provisional applications for cost-efficiency and ensuring ownership of all IP. Ownership mistakes can severely impact valuation. For example, failure to secure assignment agreements can jeopardize a company's future. Always ensure all contributors assign their inventions to the company and avoid using unlicensed or open-source IP without proper compliance.

Watch the RECAP now:

https://www.youtube.com/watch?v=cnC2k7TdypU