Sramana: Going back to the beginning of your company, at what point did you start considering and filing for patents? It is expensive to go through the legal process of filing for patents and getting them approved.
Zafar Khan: It is a very expensive experience, not just from the aspect of filing for the patents but also to conduct the legal filings necessary to protect the patents. Enforcing the patents in the marketplace is something that you must be prepared to do, and you need to be prepared to defend them against companies that essentially have unlimited legal budgets. You have to make sure that you do it in a smart way. You have to understand the patent prosecution process. You have the in-house technical capabilities to do that, and you do that in a way where you are not entering a war of attrition against a company that has unlimited legal dollars.
Sramana: We have a lot of entrepreneur asking questions about that. Early on when you were bootstrapping and had not raised capital, how did you afford to file the patents?
Zafar Khan: We continue to file patents today, but in most cases we did provisional patent applications, which give you a year to further evaluate the market opportunity. During that first year you need to file the full patent applications. From that application you can then file other patents that essentially claim components or technologies that are disclosed in your earlier patents. It is an expensive process. An entrepreneur needs to make a decision early on about the viability.
Is what you are doing going to be something you can keep as a trade secret, or do you want to disclose it to the world through a patent? Either way, you need to continue to innovate and advance the technology because the real value is having the best product in the market. The patent protects the technology that makes that product. You need to do two things that are both complicated. One, continue innovation as the market evolves so you can continuously have the most elegant design and product implementation. Two, you need to focus on how you protect the technology that is in that product.
We chose to focus on using patents to protect ourselves because in any legal scenario, anyone who uses our registered receipt in a court would be required to provide a substantial amount of information regarding how that record could be authenticated. That would not be conducive to maintaining trade secrets. We needed to have the ability to teach any court expert about the verification capabilities of our product and service. We needed to make the technology public so we really had to rely on patent protection.
Sramana: How much should an entrepreneur budget for provisional patent applications and full patent applications?
Zafar Khan: The most important thing is to understand the process before you start thinking about filing patents. You need to write as much as you can and then work with a patent attorney to refine what you have written. The most important thing is to understand how the process works all the way through. There is very little value to a pending patent. Anyone can have a pending patent. You have to make sure that your patent is written well enough and your invention is truly novel so that you can get the patent granted.
Often what happens is someone innovates early on and then waits the rest of the years for the patent to get granted. By then they have burned through the rest of their capital and they do not have any funds left to develop or commercialize the technology described in the patent. They then wind up selling the patent. If you truly have something that is novel and you can get a broad enough patent claim around that technology, you need to realize you must sustain the business for a period until the market catches up to you. If you truly have a valuable patent, it means that you were early enough to the market to be well ahead of mass market demand.
Also, don’t think that you can file and get a patent that is so narrow in scope that it will valuable. Those types of patents are easy to work around. You need to think hard before you get into the patent area. You must know exactly what your plan is. It will be a number of years before you get a patent granted and there is no guarantee that you will get a patent granted, or that a granted patent will have any real value.