I am filing provisional patents on some core technical approaches so I can share more openly with early design partners and investors.
Curious from folks who have raised Pre-Seed/Seed or worked with early-stage companies: - Do provisionals meaningfully help in fundraising or partnerships? - Or were they mostly noise until later rounds / real traction?
I am trying to calibrate how much time/energy to put into IP vs just shipping + user traction at this stage.
Would love to hear real world experiences.
The biggest risk to building a startup isn't "can I build this thing" (feasibility risk). It's "will people even care if I build this thing" (value risk) then "can I do it in a way people use" (usability risk). Patents help solve business risk, but that's generally considered to be the 4th (and last) of the risks.
There are exceptions where patents do need to be filed first or the business viability dies. However, I generally assume that if you've addressed value, usability, and feasibility risks to create something truly meaningful, your competitors will find a work around to deliver the same value, usability, and feasibility without infringing on your patent. Thus, patents, are nothing but a minor inconvenience. In some cases, the public filing of a patent, can give your competitors a leg up on competing with you.
https://www.svpg.com/four-big-risks/
Trade secrets are far cheaper and easier to maintain than patents. In short, patents are only as strong as your ability to enforce them. Also Alice Corp. v. CLS Bank International (2014) weakened software and process patents. That said, if you can’t realistically defend IP in court, you effectively don’t have it. From an early-stage founder perspective, that makes patents a questionable use of time and money and potentially what kills the company.
This may contrast from information you get from a lawyer or VC. Patents are attractive because they create an asset someone else can later buy or defend. For the founder, the incentives aren’t squarely aligned.
Neither approach is more right or wrong, but there are very real practical consequences. If you are pre-seed who is bootstrapped or done a family & friends round and are pre or early revenue, trade secrecy is by far your better option.
As an additional note, if you don't own the underlying AI models and are just a better wrapper for Claude or ChatGPT you at best have a very weak IP or patent position.
### Trade Secrets vs. Patents
*Trade Secrets:* - *Cost-Effective:* Trade secrets are generally cheaper to maintain. You don't need to pay for patent applications, maintenance fees, or legal battles. - *Flexibility:* Trade secrets can be maintained indefinitely as long as they remain confidential. This is particularly useful for rapidly evolving technologies where patents might become obsolete before they even issue. - *Immediate Protection:* Unlike patents, which take time to be granted, trade secrets provide immediate protection. This is crucial for startups that need to move quickly and protect their innovations from day one.
*Patents:* - *Legal Protection:* Patents offer strong legal protection and can be a valuable asset, especially if you plan to license your technology or sell your company. - *Public Disclosure:* The downside is that the details of your invention become public, which can make it easier for competitors to work around your patent. - *Enforcement Costs:* Enforcing a patent can be expensive and time-consuming, which may not be feasible for an early-stage startup with limited resources.
### Practical Considerations for YuliusBox
Given that YuliusBox focuses on client-side, secure web tools, here are some specific considerations:
1. *Client-Side Security:* - *Algorithmic Innovations:* If your security algorithms are novel and provide a significant competitive advantage, keeping them as trade secrets might be more beneficial. This way, you can continuously improve and update them without the need for new patent applications. - *Open Source Components:* If you use open-source components, ensure that your proprietary code and configurations are well-protected. Open-source licenses often require contributions to be shared, so be cautious about what you include in your codebase.
2. *User Privacy:* - *Data Handling Practices:* Since user privacy is a core value, consider documenting and protecting your data handling practices as trade secrets. This includes how you collect, store, and process user data. - *Compliance:* Ensure that your practices comply with relevant data protection regulations (e.g., GDPR, CCPA). While this isn't directly related to IP, it's crucial for maintaining trust and avoiding legal issues.
3. *Competitive Landscape:* - *Market Positioning:* If your main differentiator is the user experience and the integration of existing AI models, focusing on trade secrets might be more practical. This allows you to iterate quickly and stay ahead of the competition. - *Defensibility:* Evaluate whether your innovation is defensible. If it's primarily a better "wrapper" for existing AI models, a patent might not add much value. Instead, focus on building a strong brand and user base.
### Conclusion
For YuliusBox, given the nature of your product and the stage of your company, trade secrets seem to be the more practical and cost-effective approach. This will allow you to focus on developing and improving your tools while maintaining a competitive edge. However, it's always a good idea to consult with a legal expert who can provide tailored advice based on your specific situation.
Would love to hear others' thoughts and experiences on this!
I would start accumulating patents at a gradual pace at around $100m ARR in preparation for IPO, assuming that you feel that is in the cards.
(This sort of thing tend to confuse people since, the US patent office doesn't check for patent validity before granting patents. So there are a lot of companies that own invalid patents which have simply never been challenged in court.)
If you live elsewhere you should look into the laws of your local jurisdiction, but many places have the same or similar legal doctrine.
[0]: https://en.wikipedia.org/wiki/Gottschalk_v._Benson
[1]: https://en.wikipedia.org/wiki/Parker_v._Flook
[2]: https://en.wikipedia.org/wiki/Software_patents_under_United_...