Advanced Patent Strategies for Startups
Updated: Apr 27, 2021
Provisional, Omnibus, and Continuation
This post highlights patent strategies that support these objectives:
cheaply and timely protecting inventions,
buying time during the patenting process to slow cash burn, raise funds, assess commercial viability, adapt to competitive developments, and optimize between patent and trade secret IP protections,
preserving alternative trade secret strategies, and
growing a family of patents that evolves in response to product developments, competitive developments, exit opportunities, and USPTO examiner feedback.
First, a quick patent overview.
Patent Law Overview
Patents come in three types – utility, design, and plant. Here we are only talking about utility patents.
A utility patent can be granted for “any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof….”
The USPTO website elaborates as follows:
The word “process” is defined by law as a process, act, or method, and primarily includes industrial or technical processes. The term “machine” used in the statute needs no explanation. The term “manufacture” refers to articles that are made, and includes all manufactured articles. The term “composition of matter” relates to chemical compositions and may include mixtures of ingredients as well as new chemical compounds. These classes of subject matter taken together include practically everything that is made by man and the processes for making the products….
A U.S. patent gives “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States and from importing the invention.
To be patentable, an invention must be new. It cannot be described in an earlier patent or patent application. It also must not have been previously described or disclosed in any “prior art.” Prior art is any previously existing description, disclosure, or other evidence of the invention.
For years, I kept a classic 1970s Merrill Lynch poster announcing a “dollar-based, fractional share investing” plan in a big fireproof safe. It was irrefutable prior art to invalidate a patent I knew would eventually be asserted against my company, ShareBuilder.
The U.S. Supreme Court’s Alice decision in 2014 narrowed what had previously been considered patentable. This decision took particular aim at the concept of an abstract idea. Classically, one could not patent a pure mathematical algorithm (e.g., pure math) or a discovery of nature (e.g., a newly discovered element).
Within the concept of an abstract idea, this decision curtailed what had become known as “business method patents.” No longer could you slip an application by the USPTO for how to exercise a cat. This decision also limited what the USPTO considered to be patentable in the computer arts, in that “something more” must be invented beyond taking ordinary human activity and simply saying, “apply it” to a computer setting.
Alice clarified that patents may not be used to monopolize laws of nature or natural phenomena, even when modern technology is used to practice the laws of nature or natural phenomena.
Here are key excerpts from the Alice case regarding abstract ideas, laws of nature, and natural phenomena:
… We have long held that this provision contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable…..
…Laws of nature, natural phenomena, and abstract ideas are… the basic tools of scientific and technological work…. [M]onopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it,… thereby thwarting the primary object of the patent laws….
…Accordingly, in applying the §101 exception, we must distinguish between patents that claim the “‘buildin[g] block[s]’” of human ingenuity and those that integrate the building blocks into something more,… thereby “transform[ing]” them into a patent-eligible invention. The former “would risk disproportionately tying up the use of the underlying” ideas,… and are therefore ineligible for patent protection….
…An instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer is not “enough” to transform the abstract idea into a patent-eligible invention….
If you find these concepts a bit challenging, relax, so did virtually all patent attorneys.
In Chapter 9 of my book, Startup Law and Fundraising for Entrepreneurs and Startup Advisors, I provide this guidance:
While it is difficult to predict what claims are going to get through the USPTO without a Section 101 rejection, practitioners agree that such rejections are less likely with inventions that:
• solve a technological problem,
• improve an industrial process,
• make a computer perform better, or
• improve technology.
A recurring theme in the Alice decision and some later cases is that merely doing something already known and already done, but now doing it using a computer, is insufficient to transform the already known idea into an invention.
Those four bullets accurately describe the types of inventions that can pass the “abstract idea” test. Competent patent counsel can guide you on how those concepts apply in the context of a specific invention or family of inventions.
Chapter 9 of Startup Law and Fundraising for Entrepreneurs and Startup Advisors goes deeply into identifying patentable inventions and preparing and filing patent applications, including strategies to incentivize teams across technology, product, and business development to timely identify and assess potentially patentable ideas.
Provisional Versus Non-Provisional Patent Applications
A provisional patent application is a low-cost, relatively easy, one-year place holder to establish an early filing date before others file a patent on your invention first.
A non-provisional application, also called a regular patent application, must be filed within one year of a provisional application to preserve the early filing date of the provisional patent application. Otherwise, the provisional application expires and becomes abandoned.
Fortunately, expiration maintains the invention’s secrecy, as a provisional patent application that is not followed by a non-provisional patent filing remains secret and is never published. An abandoned provisional application cannot be revived.
But keep an eye out on www.StartupGC.us. I will soon publish a post on the legal magic of reviving dead patents!
Fewer Formatting Requirements. Provisional applications are also much less formal than non-provisionals. A company rolling out an exciting new product at a trade show can package up its presentation slides and internal memos and have patent counsel quickly submit those as a provisional application. But be careful, as any feature or innovation worth protecting with a later non-provisional application must be disclosed sufficiently in this filing so that a person skilled in this area can build/use the invention.
Low Cost. In addition to legal preparation fees being a fraction of the cost, USPTO filing fees for provisional applications are also lower than for non-provisionals.
Not Examined. Provisional applications are not examined by the USPTO. This further reduces upfront costs and effort compared to non-provisional applications.
Priority Date. A provisional application establishes a filing date, called a “priority date” under the “first-to-file” rule. In most countries, including the U.S. following enactment of the America Invents Act in 2011, patents go to the first inventor to file an application, not the first to invent a particular invention.
Preserving Patentability. Again, inventors have a one-year time period to file a non-provisional patent application in the U.S. after first filing a provisional application with the USPTO. However, unlike most other countries, the U.S. also allows for a one-year grace period for filing any patent application (provisional or non-provisional) after publicly disclosing or commercializing an invention.
This point is worth repeating. Unlike the U.S., most other countries have no grace period. Publicly disclosing or commercializing an invention before filing an application automatically bars patentability in those countries.
Invention disclosures made under non-disclosure agreements (NDAs) and other confidentiality restrictions do not constitute public disclosures, but participation in innovation competitions, joint projects with other students, or giving interviews to the media can undermine patent eligibility.
Timely filing a provisional application enables an applicant to disclose the invention to potential investors, customers, or even acquirors, without jeopardizing patentability, and establishes the earliest possible priority date relative to competing inventors.
Even so, use an NDA whenever possible, particularly since a failing patent strategy can still be pivoted back to a successful trade secret strategy.
Provisional Application Confidentiality. A provisional application remains completely hidden from the public eye unless a non-provisional application is filed within one year. This gives the applicant an entire year to assess (i) whether the invention in question is commercially viable and (ii) whether IP protection would be best achieved through trade secret or patent strategies – two diametrically opposed approaches, given that patents require disclosure and trade secret protections are lost by disclosure.
Withdrawal Before Publication. Even after a non-provisional patent is filed, its confidentiality can still be maintained by timely withdrawing the application prior to publication. This is a good strategy for preserving trade secrets when the examiner’s Office Actions or other data points suggest that the important claims in a patent are unlikely to be granted.
The publication date for an application is the Thursday after the date that is eighteen months after the earliest filing date claimed by the application. If an application claims priority to the filing date of a provisional application, then the projected publication date is the Thursday after the date that is eighteen months after the filing date of the provisional application. Applicants should set up calendar reminders well before any publication dates.
Patent Pending. A provisional application allows the applicant to use the phrase “patent pending,” which may have some cache with investors. More cynically, it might also scare off a competitor’s potential investors, who might fear investing in a future patent fight.
Description of the Invention. A provisional application should completely describe all aspects of an invention. A later non-provisional cannot be relied upon to protect inventions not adequately described.
Multiple Provisional Applications. In discussing the previous point with Joanne Clifford, Clinical Professor of Law at Notre Dame and Director of Notre Dame's Intellectual Property and Entrepreneurship Clinic, Professor Clifford made the following very informative observations:
"We find a lot of our entrepreneurs make significant changes to their technology after filing that first provisional. It's important to remember that it only protects what is described within it. If an entrepreneur has a breakthrough 3 months later, it may be worthwhile to file a second provisional. An eventual nonprovisional could incorporate material from both provisionals (or however many the entrepreneur files within the year!), as long as the nonprovisional is filed within a year of the first provisional."
Omnibus Patent Applications
The term “omnibus application” is not a technical term recognized by the USPTO. Rather, it is a label patent lawyers use for patent applications that throw lots of ideas on the wall. Whether filing a single application or multiple applications, inventors should strive to exhaustively disclose the company’s core innovations, including all of the possible ways future competitors might try to design around those descriptions.
An omnibus application seeks to do this in a single application, whether provisional or non-provisional.
A non-provisional might only recite a few protectable “claims,” but embedded in the application’s description and drawings may be many more potential claims that could be the subjects of future applications leveraging the initial application’s filing date, or priority date.
There may be strategic reasons for pursuing a number of separate patents across related inventions, versus originating a number of related patents from a single omnibus application. One motivation for multiple filings might be “examiner shopping.” The USPTO might assign different filings to different examiners. This might increase an applicant’s chances of finding a more favorable examiner to whom future continuation applications also could be directed.
The pros and cons of one application versus multiple applications are fact-dependent and should be discussed with patent counsel.
But for many startups with little cash, filing a provisional “omnibus” patent application with a broad description covering numerous possible invention features and attributes is usually a less expensive method for establishing a priority date for a large swath of directly and indirectly related ideas in need of more time for refined design, continued development and fundraising efforts.
Right up to the time of a patent’s issuance, protection of later-developed ideas and refinements can be sought with what are called “continuation applications.”
A continuation application strategy can be used to turn one patent into multiple patents. The original patent is often referred to as the “parent” and the continuation applications are referred to as the “children.” Together, when granted, they are referred to as a patent “family.” Child patents claim priority to the date of the parent, but they are also limited to the parent’s same 20-year life (20 years from the earliest claimed priority date in the family).
Patent Portfolio as Sword and Shield. In general, more patents provide more protection. A group, or family, of patents is referred to as a “patent portfolio.” A patent portfolio can have great value in the eyes of investors, potential customers, and potential acquirors.
Companies protected by a wall of patents can more effectively use them offensively as a “sword” to drive off competitors or extract royalties from them, and as a “shield” in response to hostile competitors sending cease and desist letters or demanding royalties based on their own patents.
Timing – Notice of Allowance. Continuation applications claiming priority to an earlier application must be filed before the original application is issued or abandoned. Fortunately, the USPTO provides plenty of advance warning and will not issue a patent until the “issue fees” are paid.
Near the conclusion of a successful examination process, the USPTO examiner sends the applicant a “Notice of Allowance” detailing the claims being allowed and those being rejected. Applicants are then free to file continuation applications prior to paying the issue fees and causing the allowed patent to be formally granted.
The processing and review of the continuation application then commences at the USPTO, even after the parent patent is granted.
Same Description and Drawings. A continuation application is easier and less expensive to prepare than its parent application because it will use the same written description and drawings as the parent. Only the claims are different. But, claims must be based on concepts disclosed in the description and drawings. Hence, the importance of expansive and detailed descriptions and drawings.
Continuation Application Claims. The goal with a continuation application is to seek a broader or different scope of protection than the original claims. They must reasonably relate to and be encompassed by the description contained in the original application, but this gray area is arguably where the “strategery” begins.
The MF Drone Hypothetical
We will illustrate some of these principles with a hypothetical product called “The Most-Fly Drone,” or the MF Drone.
Inventor Beth Wright has been a drone enthusiast for years and came up with some inventions around drone technology in recent years. With the help of a patent lawyer, she filed an omnibus provisional patent application. Her descriptions and drawings included these features and options:
automatic, instantly inflating raft that deploys immediately before any water landing,
integrated sensors and systems that instantly stop and lock the rotating blades before the raft deploys,
various methods of guided self-propulsion that return the drone raft to a place of the operator’s choosing, including a water-jet nozzle capable of providing directional thrust,
a line-throwing mechanism connected to location sensors enabling the drone operator to cause the drone raft to throw a retrieval line, either mechanically or by means of a small charge, directly in the direction of the drone joystick controller when the drone raft is close enough to the drone operator and joystick controller, enabling the drone operator to fish the drone out of the water,
automatic, high-speed inflating airbags that deploy immediately before any unintentional grounding or dangerous impact with humans or property, designed to prevent injury to others and the drone’s destruction,
anti-bird attack systems, including micro confetti poppers and audible alarms,
cameras and image recognition software capable of determining the type of bird attacking the drone and triggering alarms simulating the attacking bird’s predators, such as an owl or hawk,
systems and software that cause the drone to take evasive action in response to potential bird attacks, including among other possibilities, propulsion jets that instantly increase the drone’s altitude,
systems and software with military applications that use cameras, sound sensors, heat sensors, and sound pressure sensors, combined with software, enabling the drone to precisely determine the source of anti-drone gunfire, rockets, or other projectiles, and immediately return fire in the form of small rockets to the source of the anti-drone projectiles,
systems and software that trigger instant evasive action in the event of anti-drone gunfire, rockets, or other projectiles, including among other possibilities, propulsion jets that instantly increase the drone’s altitude,
systems and software that trigger the release of anti-missile decoy foil or other materials in response to any self-guided anti-drone rockets.
Three months after filing this omnibus application, Beth had lined up investors interested in supporting some of the non-military applications of the MF Drone. The investors had seen numerous videos of drones crashing into water and onto land and being destroyed. They believed solving those problems in the market would produce loads of sales and strong profits.
Beth also convinced them that bird attacks are a problem worth solving as well.
Beth formed MF Drone Company, accepted investment funds from the investors, and used some of the money to work with patent counsel to quickly file a non-provisional patent application. The provisional application was based on the original description, but counsel skillfully improved the description and drawings to make the non-provisional application as expansive as possible.
The non-provisional application included three independent claims covering these inventions:
automatic, instantly inflating raft that deploys immediately before a water landing,
automatic, high-speed inflating airbags that deploy immediately before any unintentional grounding or dangerous impact with humans or property, designed to prevent injury to others and the drone’s destruction, and
an anti-bird attack system, including micro confetti poppers and audible alarms.
The patent application included only these three “independent claims,” plus numerous closely related “dependent claims” that rely on, or depend on, the independent claims. Broad independent claims provide the most protection, as they cover a broader range of competing inventions than do narrow claims and are harder for competitors to “design around.”
Beth chose to go with just three independent claims partly because of the fact that the USPTO charges extra fees for each independent claim in excess of three, and also because “prosecuting” more claims increases legal fees spent in the examination process. Independent claims are the specific inventions for which patent protection is sought.
A third reason was that Beth and her counsel wanted to see how the examiner responded to these three claims before crafting others.
Written in patent legalese, Claim 1 read as follows:
The invention is claimed as follows:
1. An apparatus attached to a drone that automatically and instantly inflates and deploys a raft under the drone immediately before any water landing by the drone in order to prevent the drone from being lost or damaged as a result of the water landing.
Several of the dependent claims related to Claim 1 read as follows:
2. The raft apparatus of Claim 1, but with integrated sensors and systems to instantly stop and lock the rotating blades to prevent the drone blades from puncturing the raft.
3. The raft apparatus of Claim 1, including various methods of guided self-propulsion that return the drone raft to a place of the operator’s choosing, including, as one method, a water-jet nozzle capable of providing directional thrust,
4. The raft apparatus of Claim 1, with a line-throwing mechanism connected to location sensors enabling the drone operator to cause the drone raft to throw a line, either mechanically or by means of a small charge, directly in the direction of the drone joystick controller when the drone raft is close enough to the drone operator and joystick controller.
Dependent claims always have referential language like “The raft apparatus of Claim 1….” That language clarifies that the rotor blade braking system is dependent upon the existence of the raft described in Claim 1.
After some back and forth with the USPTO examiner in the form of Office Actions, Office Action responses, emails, and phone calls, the USPTO issued a Notice of Allowance for all three independent claims. Claims 2 and 3 were allowed largely as drafted, but Claim 1 had to be modified to require that the raft actually be a floating ball that instantly encompasses the entire drone, as the examiner had uncovered prior art regarding another type of drone raft.
MF Drone sales were brisk and produced enough revenue to support further evolution of the patent strategy. MF Drone had also become aware of a competitor making a new drone called the WaterBear with a raft that automatically deployed in the event of a water landing. Testing the competitor’s product, MF Drone realized the WaterBear drone had an automatic blade locking system like that described in MF Drone’s original application.
MF Drone Company had not yet paid the issue fees on its recently allowed patent, leaving it time to prepare a continuation application with an independent claim essentially describing the WaterBear blade locking system, as encompassed by the description in MF Drone Company’s original non-provisional patent application. Patent lawyers sometimes refer to that as “writing on top of” a competing product.
Before filing the continuation application, MF Drone Company’s market research also identified a hot new drone in the market called the TalonScout, designed to take evasive action in response to bird attacks by instantly increasing the drone’s altitude. Research indicated that its maker was flush with cash from a recent financing and a potentially serious competitive threat.
MF Drone Company added an additional independent claim to the continuation application, describing the TalonScout, as encompassed by the description in MF Drone Company’s original non-provisional patent application.
After filing this continuation application, MF Drone paid the patent issuance fees described in the Notice of Allowance. Within weeks, MF Drone’s patent issued, covering claims 1, 2, and 3.
Eleven months later, and following some back and forth with the USPTO examiner reviewing the continuation application, MF Drone Company received a Notice of Allowance for those claims too.
Beth reached out to a company that specializes in selling patents and patent licenses, to help develop a strategy for approaching the makers of the WaterBear and TalonScout drones about the possibility of purchasing licenses.
After spending a few thousand dollars and working up some materials describing how the WaterBear and TalonScout drones appear to infringe on MF Drone’s patents, Beth reached out to each of the companies and quickly worked out a nice royalty arrangement with WaterBear’s maker.
Things took longer with TalonScout’s maker, Talon Co., but the discussions eventually evolved toward a merger of the two companies. MF Drone Company had a strong team, excellent technology, and an impressive family of patents. Talon Co. ultimately offered to buy MF Drone Company for a combination of $30M in cash and 25% of the resulting combined company, Global Drone, Inc.
A year later, Global Drone entered the military drone market and launched products with these features:
systems that enable the drone to precisely determine the source of anti-drone gunfire, rockets, or other projectiles, and immediately return fire in the form of small rockets to the source of the anti-drone projectiles,
systems that trigger instant evasive action in the event of anti-drone gunfire, rockets, or other projectiles, and
systems that trigger the release of decoy foil or other materials in response to any self-guided anti-drone rockets.
Soon after entering these markets, a company called Firehawk Drone Company sent Global Drone a cease and desist letter, claiming infringement of their recently granted patents.
Global Drone’s patent counsel sent Firehawk copies of MF Drone Company’s original provisional and non-provisional patent applications, very clearly disclosing the claims that had been erroneously allowed by Firehawk’s USPTO examiner.
In its letter, Global Drone’s counsel demanded that Firehawk stand down and sign an agreement not to sue, or MF Drone Company would promptly file administrative “inter partes review” challenges to Firehawk’s patents on grounds that they were improperly issued due to the irrefutable existence of prior art. Firehawk promptly backed down and agreed in writing to never raise the issues again.
Summary and Conclusion
Financial limitations should never stand in the way of protecting a company’s core innovations. Provisional patent applications can quickly and inexpensively hold your place in the patent application line while you raise more funds and continue assessing commercial viability.
Doing so also does not have to compromise alternative trade secret strategies, which can be maintained by using NDAs, deciding not to follow up a provisional application with a non-provisional application, or timely withdrawing a non-provisional application that is faring poorly in the examination process.
Lastly, employing an omnibus application strategy and timely filing continuation applications in response to product, market, and competitive developments can form the foundations of a robust IP strategy that supports fundraising efforts and potential royalty revenue generation, provides defenses against attacks from other patent holders, and that may ultimately contribute to a company’s exit opportunities.
If you need patent counsel to help design and execute a patent strategy, I recommend Kevin Jablonski at Fisher Broyles. Kevin is my favorite patent counsel and he graciously served as the technical reviewer for this article. He can be reached by email at firstname.lastname@example.org.