AI Innovation — To Patent or Not to Patent?

While patents are useful tools when employed as part of a larger intellectual property (IP) strategy, they are not without limitations.

There has been a surge in artificial intelligence patent applications in recent years — a 6.5-fold increase from 2006 to 2018. In fact, over 55,000 patent applications were published in just 2018 alone! These figures must surely mean innovators trust that benefits are to be had from their patents. What are these benefits, then?

1. Technically, it staves off competition.

2. It boosts investors’ confidence.

3. If all else fails, selling/ licensing the patent is always an option.

But hold your horses! While patents are useful tools when employed as part of a larger intellectual property (IP) strategy, they are not without limitations. Here are some basic factors to consider in assessing if patenting is the way forward for your AI innovation:

1. Will you profit? Patents have a maximum life of 20 years, so ideally you’ll implement a successful commercialisation strategy before such expiry. Alternatively, think about who might be potential buyers of your patent (perhaps someone with the ability to commercialise or integrate your innovation). Bottom line: have a profit plan.

2. What will it cost? It’s a long process (normally, at the very least, a year) and it doesn’t come cheap (usually upwards of US$6k per jurisdiction for a simple application). Even after the initial application has been submitted, you and your patent attorneys will be spending a good amount of time responding to questions from regulators. Bottom line: weigh your cost/ benefit, and be ready to commit to the process.

3. What are the risks? A patent application will require details of your innovation to be published. Remember — patent applications do fail, so there is the risk of making your innovation known to the world but without achieving the desired legal protection. Bottom line: consult a patent attorney before making your decision.

4. Do you have an international strategy? Always identify your key markets prior to your patent application. As patents only give you protection in the territories they are granted, do not gravely (and sometimes fatally!) forget to file your patent in a vital jurisdiction. In which case, your innovation will be free for use by anyone in that territory. This may seem obvious, but such mistakes are not uncommon! Bottom line: prioritise filing your patent in the jurisdictions most vital for your business.

5. Can you enforce your patent? Unbeknownst to some, patents are not a perfect solution. As many AI applications are blackboxed, unless you are able to examine a suspect’s algorithm, it may be next to impossible to discover patent infringement. Moreover, patent enforcement is expensive (legal costs are often well over US$100k!). Bottom line: enforcement should not be your biggest consideration, but it may be a consideration for those who invest in or acquire your business.

6. Alternatively, can you keep a secret? A possible alternative strategy is keeping your innovations as trade secrets. Part of this process will require you to implement security measures to keep its details tightly under wraps. This is often a viable option, especially since AI innovations are difficult to reverse-engineer. Moreover, trade secrets can be perpetual (think: Coca-Cola recipe). However, you may run the risk of having others independently develop and patent the same (or materially the same) technology. In which case, you may end up infringing their patents! Bottom line: patents are not your only option.

7. What do investors think? Investors often turn down an innovative proposition — why? An absent patent. It’s an unfortunate situation; you may have concluded that keeping the innovation secret is your best option (and it very well might be!), yet some investors just can’t seem to get with it. It is paramount that you thoroughly understand and are ready to explain/ justify your IP strategy (a full patent approach/ trade secret approach/ mixed approach) to prospective investors. Bottom line: help investors appreciate your IP strategy.

Olivier Le Moal on Canva

Making Sense of Your Situation

The decision to patent your innovation is ultimately a commercial one. To help put things into perspective, here are some self-assessment questions that could help you distil your thoughts:

• Sufficient funds: Are you confident of affording to patent your technology across all your intended key markets?

• Commercialisation: Will you have sufficient funds to patent your technology and still implement your commercialisation strategies across your intended key markets? Are you confident of successfully commercialising within the patent’s life cycle?

• Likelihood of profit: How likely will you profit by patenting your innovation (e.g. by keeping competitors at bay, or by making your business more attractive for investment or acquisition)? Will the patent cover something that other industry players are likely to want to do, such that they would see strategic value in it?

• Vitalness of confidentiality: How crucial to your business is blackboxing your innovation?

• Details to be disclosed: Having consulted with your legal professional about the patent application, how much detail about your innovation must you reveal? Is this required level of disclosure stomachable for you?

• Trade secrets: Are you able to secure the details of your innovation, and what will this cost you? How does this compare to the cost of patenting? If it is imperative that the entirety of your innovation be blackboxed, would keeping it a trade secret be less expensive (and hence more feasible)?

• Risk of independent developments: How likely is it that your competitors are able to patent practically the same technology?

• Support from your investors/ partners: If you were to pursue patenting, will your investors/ partners be willing to work with you and provide you with the necessary capital through the entire process (including subsequent enforcement actions!)?

• Unlocking doors: Will having obtained a patent significantly improve your standing with investors?

In doing this exercise it is essential you seek the advice of a qualified legal professional. A good legal professional should be able to not only guide you through these questions but also help take your IP strategy to the next level.

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Originally published at https://hellotmrapac.medium.com/ai-innovations-to-patent-or-not-to-patent-af0a462f7e5f on 25 Sep 2020