Raising funds for startups through patents

Last Updated at: January 09, 2020
1217
Raising funds for startups through patents

Introduction

A start-up may run out of money mid-way, since they face a lack of finance more often, which may damage their future prospects. Thus, it is generally advisable for start-ups to first ensure the availability of finance, upon which rests all the other functions of an organization. The sources of raising funds apart from family and friends, are various, to name few, angel investors, business network and crowdfunding. However, nowadays, patents are also considered to be a potential source of raising funds for start-ups.

What is a patent?

A patent is an intellectual property that grants owners sole rights to restrict the sale, marketing or use of their invention. In simpler terms, patents provide a monopoly to the inventor for the product’s operation in the market for a specific period. A patent has various advantages such as:

i) Patents prevent others from using an invention, thereby keeping the competitors at bay.

ii) Patenting helps the inventor in generating money by licensing the patent to others for their use or sale with another asset.

Patent Your Innovation Right Now

Fundraising through patents

One of the reasons an inventor has to patent their invention is because it is an essential source for generating revenue and as such it will further help in introducing the invention to the market without the fear of infringement.  Patents are considered to be a vital source of raising funds on account of the following reasons:

  1. It ensures no competitor infringement 
  2. It ensures a continued flow of revenues in the form of profits
  3. An invention that has already been patented will attract investors big time as it shows that the invention has a promising future thereby acquiring the trust of the investors.
  4. Further, the priority dates will ensure that patents are provided in foreign countries as well which is a plus sign for the invention of a start-up having the market potential abroad.
  5. Availing a patent will secure the position of the invention in the global markets sooner and quicker as the grant of the patent will accelerate its creation.
  6. Further, as a part of the scheme of the Government to encourage inventors to file for patents, they also provide attractive tax rebates and speedy processing of documents.

Even an incomplete invention can be patented through a provisional patent application. A provisional patent is an optional step wherein the provisional patent applicant only defines the field of the invention and its scope. It is a form of interim protection against the unlawful use of one’s idea while one is still debating whether they should pursue a full patent, when facing financial problems or when an invention is not complete in all aspects.

A provisional patent application will operate for 12 months within or after which one has to file a complete specification without which the provisional patent application will be considered abandoned. The provisional specifications given in such provisional application will not be removed after filing for a full patent. However, it is cautioned that the provisional application has to be well written and in consonance with business objectives.

It may gain increased continuum in the near future as provisional patenting can provide insights into the success of the product and the standing of the start-up after 1 year and as to whether one should proceed with a full patent. The advantages also include:

  • Costs of filing such provisional application are low.
  • It prevents from the filing of any patents subsequently related to that field.
  • It serves as a test-drive for the invention before it goes for a full patent in the market.
  • It gives an extra year of protection.

4 Fundraising stages of a startup

Conclusion

It is pertinent to understand that a startup can raise funds through patenting but only after securing it which, otherwise will be subject to misuse. An invention can be sold and huge profits can be earned but only for a short-term. But patenting is a means of generating revenue for years to come in the longer run. The inventor can always licence the patent to those willing to use the invention and in that way, the inventor will be receiving royalties with every usage of the product.

Frequently Asked Questions

Who has to file taxes in India

Filing income tax is a must for any responsible citizen earning a income more than 2,50,000 in India.Everyone who has income from business, job, consultancy services etc. Learn More about Income Tax filing

Who is eligible for ESI?

ESI scheme is applicable to factories, corporate organisation, offices, restaurants, medical institution, cinema theatres where more than 10 people are employed. ESI fund provide medical benefits to the employees and their dependents. More info on ESI registration

Is Fssai license mandatory?

FSSAI license should be obtained from all the Food Business Operator(FBOs). The FSSAI authority ensures the food safety, hygiene and related issues of concern. More information on FSSAI


Who gives ISO certification?

There are many consultants claiming to provide ISO grants that can help companies but only a certified body or registrar can grant the same. More on ISO Certification


What are the payments on which tax is deducted at source?

TDS is a kind of advance tax and is deposited periodically with the government. The deducted TDS can be claimed as a tax refund after filing ITR. Details on TDS Return Filing


How to register for trademark online

The trademark online can be registered through U.S. Patent Trademark Office(UPSTO), Trademark Electronic Application System(TEAS) or through paper application. Details on Trademark Registration

What is the criteria for MSME?

MSME (Micro, Small & Medium Enterprises) are categorized are small entities that are defined based on the size of the investment they have received. Learn more about SSI/ MSME Registration

Raising funds for startups through patents

1217

Introduction

A start-up may run out of money mid-way, since they face a lack of finance more often, which may damage their future prospects. Thus, it is generally advisable for start-ups to first ensure the availability of finance, upon which rests all the other functions of an organization. The sources of raising funds apart from family and friends, are various, to name few, angel investors, business network and crowdfunding. However, nowadays, patents are also considered to be a potential source of raising funds for start-ups.

What is a patent?

A patent is an intellectual property that grants owners sole rights to restrict the sale, marketing or use of their invention. In simpler terms, patents provide a monopoly to the inventor for the product’s operation in the market for a specific period. A patent has various advantages such as:

i) Patents prevent others from using an invention, thereby keeping the competitors at bay.

ii) Patenting helps the inventor in generating money by licensing the patent to others for their use or sale with another asset.

Patent Your Innovation Right Now

Fundraising through patents

One of the reasons an inventor has to patent their invention is because it is an essential source for generating revenue and as such it will further help in introducing the invention to the market without the fear of infringement.  Patents are considered to be a vital source of raising funds on account of the following reasons:

  1. It ensures no competitor infringement 
  2. It ensures a continued flow of revenues in the form of profits
  3. An invention that has already been patented will attract investors big time as it shows that the invention has a promising future thereby acquiring the trust of the investors.
  4. Further, the priority dates will ensure that patents are provided in foreign countries as well which is a plus sign for the invention of a start-up having the market potential abroad.
  5. Availing a patent will secure the position of the invention in the global markets sooner and quicker as the grant of the patent will accelerate its creation.
  6. Further, as a part of the scheme of the Government to encourage inventors to file for patents, they also provide attractive tax rebates and speedy processing of documents.

Even an incomplete invention can be patented through a provisional patent application. A provisional patent is an optional step wherein the provisional patent applicant only defines the field of the invention and its scope. It is a form of interim protection against the unlawful use of one’s idea while one is still debating whether they should pursue a full patent, when facing financial problems or when an invention is not complete in all aspects.

A provisional patent application will operate for 12 months within or after which one has to file a complete specification without which the provisional patent application will be considered abandoned. The provisional specifications given in such provisional application will not be removed after filing for a full patent. However, it is cautioned that the provisional application has to be well written and in consonance with business objectives.

It may gain increased continuum in the near future as provisional patenting can provide insights into the success of the product and the standing of the start-up after 1 year and as to whether one should proceed with a full patent. The advantages also include:

  • Costs of filing such provisional application are low.
  • It prevents from the filing of any patents subsequently related to that field.
  • It serves as a test-drive for the invention before it goes for a full patent in the market.
  • It gives an extra year of protection.

4 Fundraising stages of a startup

Conclusion

It is pertinent to understand that a startup can raise funds through patenting but only after securing it which, otherwise will be subject to misuse. An invention can be sold and huge profits can be earned but only for a short-term. But patenting is a means of generating revenue for years to come in the longer run. The inventor can always licence the patent to those willing to use the invention and in that way, the inventor will be receiving royalties with every usage of the product.

Frequently Asked Questions

Who has to file taxes in India

Filing income tax is a must for any responsible citizen earning a income more than 2,50,000 in India.Everyone who has income from business, job, consultancy services etc. Learn More about Income Tax filing

Who is eligible for ESI?

ESI scheme is applicable to factories, corporate organisation, offices, restaurants, medical institution, cinema theatres where more than 10 people are employed. ESI fund provide medical benefits to the employees and their dependents. More info on ESI registration

Is Fssai license mandatory?

FSSAI license should be obtained from all the Food Business Operator(FBOs). The FSSAI authority ensures the food safety, hygiene and related issues of concern. More information on FSSAI


Who gives ISO certification?

There are many consultants claiming to provide ISO grants that can help companies but only a certified body or registrar can grant the same. More on ISO Certification


What are the payments on which tax is deducted at source?

TDS is a kind of advance tax and is deposited periodically with the government. The deducted TDS can be claimed as a tax refund after filing ITR. Details on TDS Return Filing


How to register for trademark online

The trademark online can be registered through U.S. Patent Trademark Office(UPSTO), Trademark Electronic Application System(TEAS) or through paper application. Details on Trademark Registration

What is the criteria for MSME?

MSME (Micro, Small & Medium Enterprises) are categorized are small entities that are defined based on the size of the investment they have received. Learn more about SSI/ MSME Registration

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