Patenting Inventions

Patenting Beer – Claiming Compositions, Apparatus, and Methods of Brewing

Can I patent beer?

Yes, a brewer can patent beer.  Similarly, the inventor could pursue patents for new methods of making beer or new devices for making beer.  Those patents give the inventor the right to exclude others from making or using the invention without permission.  The idea is that the inventor should have the right to own the idea for a limited time in exchange for bringing it into the world.

The rapidly evolving Extreme Brewing community embodies innovation.  Brewers are constantly seeking out new— different — beers.  Accordingly, the industry is constantly inventing new technology.  

Beer can be patented as a composition of matter, giving the brewer ownership of that recipe

Beer can be patented as a composition of matter, giving the brewer ownership of that recipe

Like any other food technology, a new beer can be patented as a “composition of matter.”  The brewer would need to claim it in a patent application, explaining  how it differs from all other beers.  Here, defining the beer as a chemical invention provides numerous opportunities for distinguishing it from the prior art.

How to patent beer – claim it chemically

To receive a patent on beer, the inventor (i.e., the brewer) would benefit from claiming it as a new composition of matter.  The brewer should draft patent claims, defining the beer and showing its inventive features.  The claims should emphasize how the new beer differs chemically from all others that came before it.

For example, the beer could differ on account of using different ingredients.  Or, it could differ on account of selecting particular varieties of amounts of traditional ingredients.  For example, particular types and amounts of hops, herbs, spices, yeasts, or barley give rise to unique chemical properties.  Alternatively, a brewer may add new ingredients, such as cannabis to create new combinations of molecules. Those sorts of innovations would justify a patent on the new composition of matter.  For a brewer who creates something truly innovative, claiming the invention chemically could provide the best way for capturing the value of that contribution.

A chemical invention from start to finish

Each of the components used to brew can be defined chemically.  Then, during the brewing process, these ingredients undergo a variety of chemical transformations. For example, during fermentation, yeast converts carbohydrates into ethanol and carbon dioxide.  Ultimately, the brewer enjoys a finished product, having its own chemical composition.

Often, new foods and beverages are readily distinguished based on their molecular components.  Each of these distinctions provides an opportunity for patenting the invention.  The brewer creates inventive subject matter every time he deviates from traditional recipes or methods.  Recently the TV Show Brew Dogs discussed adding kelp to beer.  Dogfish Head Brewing recently introduced a beer with garlic.  And Ballast Point is currently serving a beer called “Red Velvet,” which is made with beets and chocolate.

Ballast Point is serving a "Red Velvet" Beer made with beets and chocolate

Ballast Point is serving a “Red Velvet” Beer made with beets and chocolate

An inventor of new (different) beer ideas can apply for a patent on those ideas.

Why bother patenting beer?

Many brewers scoff at the idea of filing a patent.  Or they find the idea immoral or untrue to the community.  Practically speaking, filing a patent application (on any technology) only makes sense if the invention is truly new and better.  (Something known or obvious cannot be patented).  If the invention meets those criteria, then filing a patent application would give the inventor the option for preventing competitors from practicing the invention.  The inventor/patent holder would get to decide who gets to use the invention.  For example, a small brewer with a patent could prevent (or demand royalties) if a large commercial entity began copying the invention.

What’s the process for patenting beer?

After drafting claims, the inventor would file them as part of a patent application at the United States Patent and Trademark Office (“USPTO”).  During patent prosecution at the USPTO, the application would be examined by an examiner.  The inventor would have the opportunity to explain why the beer is both new and innovative (i.e., nonobvious).  After convincing the examiner of the newness and nonobviousness of the beer, the examiner would allow the claims.  The inventor would then receive a patent on the new beer composition.

 

(Legally Speaking) Night Before Christmas

I’ve seen this making the rounds and thought it was give some folks a holiday laugh….  If anyone knows the author, I’d love to give credit.

Whereas, on or about the night prior to Christmas, there did occur at a certain improved piece of real property (hereinafter, the “House” a general lack of stirring by all creatures therein, including, but not limited to, to wit, a mouse.

A variety of foot apparel, e.g. stocking, socks, etc., et al., had been temporarily affixed by and around the chimney in said House, with appropriate care, in the hope and/or belief that St. Nick a/k/a St. Nicholas a/k/a Santa Claus (hereinafter, “Claus”) would arrive at sometime thereafter.

The minor residents, i.e. the children, of the aforementioned House were located in or around their individual sleeping locations, or beds, and were nestled and engaged in nocturnal hallucinations, i.e. dreams, wherein visions of confectionery treats, including, but not limited to, candies, nuts and/or sugar plums (without and not meeting FDA labeling requirements) did dance, cavort and or otherwise appear in said dreams.

Whereupon the party of the first part, (sometimes hereinafter referred to as I (“I”)), being the joint owner or tenant-in-common in fee simple absolute of the House, with the party of the second part, (hereinafter “Mamma”), and said Mamma had retired for a sustained period of sleep (at such time, the parties of both parts were clad in various forms of headgear, e.g. kerchief and cap) for a long, seasonal (“winter”) nap.

Suddenly, and without prior notice or warning, there did occur upon the unimproved real property adjacent and appurtenant to said House, i.e., the lawn, a certain disruption of unknown nature, cause and/or circumstance (“clatter”). The party of the first part (“I”) did immediately arise and rush to a fenestration (“window”) in the House to investigate the cause of such disturbance. In the process, the party of the first part (“I”) mistakenly tore open the shutters and threw up the sash.

The party of the first part noticed the moon, in full phase, on the topmost part of the new-fallen snow. The party of the first part was informed and believed, and based upon such information and belief, alleged that said moon gave the lustre of mid-day, otherwise known as noon, to objects below. At that time, the party of the first part (“I”) did observe, with some degree of wonder and/or disbelief, a miniature sleigh (hereinafter the “Vehicle”) being pulled and/or drawn very rapidly through the air by approximately eight (8) reindeer. The driver of the Vehicle appeared to be and in fact was, the previously referenced Claus.

Said Claus was providing specific direction, instruction and guidance to the approximately eight (8) reindeer and specifically identified the animal co-conspirators by name: Dasher, Dancer, Prancer, Vixen, Comet, Cupid, Donner and Blitzen (hereinafter “the Deer”). (Upon information and belief, it is further asserted that an additional co-conspirator named “Rudolph” may have been involved.)

The party of the first part witnessed Claus, the Vehicle and the Deer intentionally and willfully trespass upon the top of the porches, walls and/or roofs of several residences located adjacent to and in the vicinity of the House, and noted that the Vehicle was heavily laden with packages, toys and other items of unknown origin or nature. Suddenly, without prior invitation or permission, either express or implied, the Vehicle arrived at the House, and Claus entered said House via the chimney.

Said Claus was clad in a red fur suit with white fur, which was partially covered with residue from the chimney, and he carried a large sack containing a portion of the aforementioned packages, toys, and other unknown items. He was smoking what appeared to be tobacco in a small pipe, and blowing circles that resembled wreaths in blatant violation of local ordinances and health regulations.

The party of the first part observed that Claus’s eyes would not have passed a field sobriety test in that they twinkled. Moreover, Claus’s facial expressions (i.e. “dimples”) appeared overly joyful. As further evidence of his state of being, Claus’s cheeks were very red, almost like roses, his nose was likewise red like a cherry. Claus’s mouth could have been said to look like a bow, and the extended hair growth under his chin could likewise be said to be as white as the snow.

Although Claus did not speak, he did laugh, which caused his rotund stomach area to move about in a manner similar to, but not quite like, a bowl full of jelly. Claus thereafter immediately began to fill the stocking of the minor children, which hung adjacent to the chimney, with toys and other small gifts. (Said items did not, however, constitute “gifts” to said minor pursuant to the applicable provisions of the U.S. Tax Code.)

Upon completion of such task, Claus touched the side of his nose and flew, rose and/or ascended up the chimney of the House to the roof where the Vehicle and Deer waited and/or served as “lookouts.” Claus immediately departed for an unknown destination.

However, prior to the departure of the Vehicle, Deer and Claus from said House, the party of the first part did hear Claus state and/or exclaim: “Merry Christmas to all and to all a good night!”

Or words to that effect.

Fike’s “Brick” Kickboard is “First Ever” Coreboard

Fike’s “Brick” Coreboard Invention

I recently saw an article on SwimSwam about Fike Swim Product’s new kickboard. The article jogged my ongoing interest about new kickboard technology and how to patent kickboards.

An article on SwimSwam describes the “Brick” kickboard as the world’s first-ever coreboard.  The Brick is a 6 lb weighted kickboard, which allows the user to “turn any kick set into a total body workout that actually changes a swimmer’s body position in the water.”  These benefits are said to be lasting—”even after the kicking is done.”

The Brick was developed by Fike Swim Products.  Unlike other kickboards, the Brick is said to “float just enough to support its own weight, so it sinks when a swimmer places his/her arms on top, forcing the swimmer’s core, upper body, and legs to work to maintain body position on top of the water while kicking.”

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Photo of Brick coreboard that was published on SwimSwam.com

Based on the description above, this sounds like an exciting and patentable new technology.

I say “exciting” because I like the idea of getting a total body workout during kick sets–I usually kick without a board so that I get a better all-around workout.  This board could be a step beyond that!

I say it’s probably patentable because the Brick is described as the “first ever” of it’s kind and those differences appear to provide some benefits beyond anything that’s come before it.  Now they just need to convince an examiner at the patent office that the Brick is “new” and “not obvious.”

Food Patents – Can I patent a food or recipe?

Patenting Foods and Recipes

Recently the Huffington Post published an article on an ingenious new food that gets kids to eat their broccoli. When I see achievements like this, I always wonder whether the inventor filed a patent application on the new technology.

Foods are patentable, just like any other composition.  The patent laws do not distinguish a food simply because we eat it.  Rather, the law would classify food as a composition of matter.  At the United States Patent and Trademark Office, food recipes would probably fall under Patent Class 426: “Food or Edible Material.”

Can I patent food?

A new food can be patented as a composition of matter.

Food is Patentable as a Composition

Under U.S. Patent law, an inventor can patent a process, machine, manufacture, or composition of matter.  The food must be new, useful, not obvious, and meet the other disclosure requirements for patentability.  However, the critical point remains the same:  Food can be patented.  The patent laws do not discriminate food from any other composition of matter.

The Food Must be “New”

Only new inventions can be patented.  This is ofteatent application35 U.S.C § 102.  Often, a “new” food is difficult to distinguish from a prior art food.  For example, an inventor may struggle to differentiate a truly innovative soup from all prior art soups that came before it.  For a truly new soup, drafting a successful patent application depends on the inventor’s approach to drafting claims.

Thinking Small

A clever way to distinguish one food from another is to describe it at the molecular level.  In the soup example above, understanding how one soup differs in molecular composition would provide a powerful means for defining the differences.  Instead of arguing why certain ingredients are subjectively better, the inventor could objectively quantify the improvement.  Instead of qualitatively explaining why certain recipes are better, the inventor could point to concrete molecular differences.  Defining a food invention in terms of it’s molecular composition provides a significant advantage when arguing for patentability during patent prosecution.

Food is patentable

The greatest challenge is explaining why a new food was truly innovative.  Here, Chef Peter Wong worked with some unique combinations of ingredients at the 2012 DC Chili Cook-off in Washington, DC.

The Food Must be “Non-Obvious”

For most inventions, obviousness is the critical hurdle to getting a patent.  The non-obviousness requirement for patentability is set forth in 35 U.S.C. § 103.  In short, the inventor must show that the food would not have been a trivial or routine advance beyond other  previously disclosed foods.  This area of patent law is very complicated for a variety of reasons.  The undisputed standard for evaluating whether an invention is obvious can be found in the Supreme Court’s 1966 Graham v. John Deere decision.

The Inventor Must Adequately Disclose the Food.

In order to receive a patent, the inventor must provide a comprehensive disclosure of the invention.  The inventor must also teach the public the best way to make and use it.  In the case of a new food, the inventor must teach the public how to make it without “undue experimentation.”  The recipe must be something that can be reproduced by someone having ordinary skill in the industry.  This disclosure rbargain an inventor accepts when applying for a patent.  The inventor must give up the secret recipe in exchange for a limited period of patent protection.

Patenting Swimming Gear

Can I Patent Swimming Gear?

Patent Swimming Gear

The Sport of Swimming Continues to Develop New Technology

Yes, technology for swimming can be patented just like any other invention.  The inventor of new swimming gear can draft patent claims and file a patent application directed to that new technology.  To be patentable, the swimming gear must be “new,” that is different from all swimmer gear existing before it.

In addition to being “new,” the invention must not be an obvious variation of swim gear that existed when the new swimming gear was invented.  The legal test for obviousness is often very complicated.  The test of “obviousness” is called the Graham Test, which we wrote about it in an early post.

As a rough guide, an inventor should be able to receive patent protection on any significant improvement over the state of the art.  (For example, a better kickboard, a new haircare composition, or a new design for a hand paddle).  In the case of swim gear: the greater the difference from existing gear, the more likely it is that the invention can be patented.  Also, if the invention provides an unexpected benefit beyond similar swimming gear, then it is probably patentable.

Patent Swimming Compositions

Swimming seeing constant changes in pool chemicals and chemical testing kits

Subject to the above requirements (new and not obvious), most categories of swimming gear should give rise to patentable subject matter.  For example, innovations in clothing, training aids, diagnostic tools, pool equipment, chemicals, sports drinks, and personal care items could all be patented.

Innovative swimmers have been developing new products for decades.  For example, in 1988, Eney Jones patented the Eney Bouy, which us patented in U.S. Patent No. 4,929,205.  Recently, Playcore invented a new Colorado Timing Systems Titanium deck plate for Colorado Timing Systems.  See US Patent Number 8,602.815 (“Swimming pool deckplate for horizontal surfaces with integrated slopes around electrical contacts”).

Chadeayne LLC’s President, Dr. Andrew Chadeayne has personal experience patenting products for swimmers.  Several years back, he developed the first chlorine removal product that actually eliminates chlorine from hair and skin.  Because of his expertise in chemical patent law, he filed a handful of patent applications directed to SwimSpray.  Those patent applications have been instrumental in developing SwimSpray’s business.

How to patent swimming technology?

As stated above, patenting swimming technology should follow roughly the same course as patenting other technology.  In the swimming arts, the inventive process could follow a path like this:

  • The inventor has an idea for a swimming product;
  • the inventor refines the idea;
  • the inventor designs a prototype;
  • the inventor builds the prototype and tests it;
  • the inventor refines the prototype and builds a commercial embodiment.

The above scheme may skip steps or include additional steps.  In any event, one clear omission in the list above is filing a patent application.  To own the invention, the inventor must claim the invention in a patent application.

When should the inventor of a new swimming technology file a patent application?

The inventor should file a provisional patent application before disclosing the invention to others.  Ideally the inventor should file a patent application as soon as they can clearly define and describe the invention.  The inventor does not need to build the invention or even make a prototype.  The inventor only needs to provide clear instructions for how someone in the industry could make and use the invention.

Filing a provisional patent application allows the inventor to discuss the idea with potential business partners while minimizing the risk of having the idea stolen.  Filing a provisional patent application also gives the inventor one year to refine the invention and file a regular patent application.

Pet Product Patents

Patenting Pet Products

Pet owners will spend an about $58.5 Billion on their pets in 2014. Here’s the estimated breakdown for pet products in 2014:

Food $22.62 billion 
Supplies/OTC Medicine $13.72 billion
Vet Care $15.25 billion
Live animal purchases $2.19 billion
Pet Services: grooming & boarding $4.73 billion

This is my dog Carl.  He is pictured here chewing a Kong toy.

This is my dog Carl. He is pictured here chewing a Kong toy.

New Pet Products are Patentable

New pet technologies are patentable.  From the standpoint of patent law, the patentability analysis is the same as for all other technologies.

New pet food or food products could potentially be patented as compositions of mater.  Other patentable pet products include devices and machines, such as toys, crates, cages, scratching posts, etc. These could be patented as machines.  Vet care would include drugs (compounds and compositions of matter), medical devices, methods of treatment, etc..  The regular rules of patentability apply.  The technology must be new when compared to all existing technology; and it must not be an obvious improvement over existing technology.

Owning a monopoly on a popular new pet product provides a significant market advantage–they ability to exclude all competition from making, using, and selling that invention.  This monopoly allows the owner of the patent to set the price.  Accordingly, innovators in the pet space should claim their new technology.

Below are a few interesting examples of patented pet products.

Interesting Pet Product Patents

IP watchdog wrote about United States Patent No. 6,360,693, which claims an animal toy.  This patent is the famous case of patenting a stick.  The Kong Company, LLC makes a variety of highly recommended dog toys.  They have a portfolio of patents and patent applications. Kong’s dental toys are built with patented Denta-Ridges, which are special grooves designed to clean teeth and sooth gums as dogs chew.

United States Patent No. 5,443,036 defines a method of exercising a cat.  This patent claims methods including a “beam of invisible light produced by a hand-held laser apparatus onto the floor or wall or other opaque surface in the vicinity of the cat, then moving the laser so as to cause the bright pattern of light to move in an irregular way fascinating to cats, and to any other animal with a chase instinct.”

Chadeayne LLC Price List

Chadeayne LLC offers two options for handling project costs: Flat Fee; and Hourly.

Flat Fee Drafting Services

  1. Search and Analysis $3,500
  2. Claim Drafting $3,500
  3. Application Drafting $3,500
  4. Full-service Application Preparation $9,000

Flat Fee Patent Prosecution Services

  1. Responding to Office Action $3,000
  2. Interviewing Patent Examiner $2,000

Hourly Services

  • $500 per hour
  • $2,000 per half day (4 hours)
  • $3,000 per full day (8 hours)

Beer Pong Patents by Jeremy Armstrong of Strong Arm Cups

Patent Pending Beer Pong Technology? Strong Arm Cups

Patents on beer pong?  Maybe soon.

According to PRWEB, Strong Arm Cups has introduced a better way to enjoy beer pong. Strong Arm Cups has invented a beer pong kit, which contains 20 playing cups, 20 damper inserts that go inside the playing cups, and four drinking cups. The combination of the items in the kit promises to “eliminate the dirty and wasteful use of traditional, disposable plastic cups.”

The Strong Arm beer pong patent kit includes several items that improve the beer pong experience

The Strong Arm beer pong patent kit includes several items that improve the beer pong experience

Strong Arm Cups is designed to maintain the core aspects of beer pong while addressing some of the more disgusting elements of the current game, such as having to drink dirty beer due to crud getting on ping pong balls, multiple people drinking from the same cups, and beer being spilled during game play. Strong Arm Cups presents a simple solution to these problems by introducing designated playing cups with dampers for consistent game play and individual drinking cups with clear demarcations to show players how much to drink for each sunk cup.

The Strong Arm Cups beer pong kit will retail for $26 however an early bird special of $20 will be offered through the Kickstarter campaign.

Jeremy Armstrong, Inventor of Patent Pending Strong Arm Cups

The Strong Arm Cups kit was invented by Jeremy Armstrong.  (The name makes more sense now, doesn’t it?)

“I’ve always loved beer pong, but was disgusted by how gross the playing cups and balls became,” said Jeremy Armstrong, creator of Strong Arm Cups. “I wanted to maintain the essential integrity of the game, while making a few minor improvements to make the game better for everyone.”

Strong Arm Cups was created by Jeremy Armstrong, a family-man who has always had a passion for beer pong. After a year of design and engineering work this patent pending beer pong kit is ready to be brought to the party thirsty masses. Armstrong is looking forward to growing his business in the future and improve more drinking games.

Where’s the patentable subject matter?

What can be patented about this invention?  In the past we have discussed how new beers recipes, methods of making beer, and beer apparatus can be patented.  Why not beer games?
The same rules of patentability apply to beer games as any other type of invention.  The invention must be both new and not obvious.  Here, I suspect that this combination of elements is new.  That is, Mr. Armstrong is using these pre-existing pieces in a new way to achieve a new result.  Provided that the “kit” is found to be new, then the patentability of the Strong Arm technology would depend on whether or not it “would have been obvious” to a “person of ordinary skill in the art.”  That question will turn on the differences between the Strong Arm technology and the prior art in this field of endeavor.

Patenting Cannabis Technology

Patenting Cannabis Technology

The cannabis plant is not patentable because it has been in the public domain for centuries.

The cannabis plant is not patentable because it has been in the public domain for centuries.

Changes in cannabis culture are creating incredible opportunities for new cannabis technology.  Cannabis and cannabis derived products are overwhelmingly popular in the worldwide market.  This popularity is especially noteworthy because the plant and its derivatives are still illegal in the United States.  But the war on cannabis appears to be coming to a close.  (See video below).  And the popularity of the drug appears to be on the rise, for both medical and recreational uses.

The above changes suggest tremendous opportunities in the cannabis technology industry.  Events like the Cannabis Business Summit hope to capture some of these opportunities. As inventors rush into that space, they should remain cognizant of the opportunities for patenting their inventions.  For example, inventors could define their inventions as new compositions, devices, or methods.

Changing Cannabis Culture Creates Patent Opportunities

Setting aside the political issues associated with cannabis, the changing climate is creating incredible business opportunities.  According to CNBC, the legal cannabis business is already huge.  And the Huffington Post opines that those sales will quadruple by 2018.  Most of this business comes from growing and selling the plant itself.  But other industries are beginning to blossom.  For example, the cannabis food and beverage industry and cannabis device industry have experienced wild growth.

With these new industries come new products and new technology.  Inventing something new (i.e., different) gives rise to patentable subject matter.  In the case of cannabis, there are a variety of opportunities for inventing new technology.

New Chemical Compositions Derived from Cannabis.

Although the cannabis plant has been known for thousands of years, making new compositions from that plant would give rise to patentable inventions.

Although the cannabis plant has been known for thousands of years, making new compositions from that plant would give rise to patentable inventions.

Naturally occurring substances cannot be patented.  As compounds, they are not “new” because they occur in nature without human ingenuity.  However, new purified forms of the chemical components of cannabis are potentially patentable.  Similarly, new combinations of known molecules can be patented.  Regardless of political attention, the patent office will treat cannabis inventions as chemical inventions.

Given the variety of different molecules found in the cannabis plant, the potential for new combinations of those molecules is virtually infinite.  Finding new combinations of molecules having desirable properties would give rise to new compositions of matter.  These new cannabis compositions can be patented.

New Cannabis Edibles are Patentable.

According to CNBC, the legalization of medical cannabis in several states has paved the way for a budding edible medical cannabis industry. Small businesses in states such as Colorado and California are making cannabis derived treats such as candy, cookies or soda.

New Edibles Derived from Cannabis are Patentable

New Edibles Derived from Cannabis are Patentable

As we have discussed in some earlier articles, new foods (e.g., candy, cookies, etc.) can be patented as compositions of matter.  New flavors of those foods could give rise to additional patents.  Given that this class of cannabis containing readymade foods is relatively young, the body of prior art is relatively small.  Less prior art makes it more likely that the foods could be defined as new compositions, increasing the likelihood that they could be patented.

Like foods, cannabis beverages (e.g., cannabis beer or cannabis soda) could be patented as compositions of matter.

Along with opportunities for patenting cannabis compositions per se comes the opportunity for patenting methods of making those new compositions.  A new food is probably made via a new method.  That new method could be claimed and patented.

New devices and methods for administering cannabis or cannabis compositions are patentable

The Pax by Ploom illustrates one example of technology growing up around cannabis development

The Pax by Ploom illustrates one example of technology growing up around cannabis development

New devices for using or administering cannabis are patentable.  Smoking cannabis has one indisputable downside—the user is smoking the plant.  Generally speaking, breathing in burning materials is bad for the user.  (Humans should not breath in things that are on fire).

Responding to this downside of smoking, the cannabis device market has grown significantly over the years.  Wikipedia describes several varieties of herbal vaporizer technologies.  And some websites, e.g., GotVape, specialize in selling commercial embodiments of the vaporizing technology.  Many devices, such as Pax by Ploom or the iolite product line have been patented.  But the space still remains wide open.  Inventors of new devices should follow iolite’s lead by claiming their inventions.

Patenting methods of administering cannabis

U.S. patent law recognizes “methods” as a separate category patentable subject matter.  In addition to patenting new “devices” for administering cannabis, the inventor could pursue patent claims directed to the methods of administering cannabis by using those devices.

Changing Culture Suggests Increasing Opportunities for Patenting Cannabis

In recent years, the public opinion surrounding cannabis has changed considerably.  And it appears that the nation (and the world) will probably continue to move toward decriminalization and legalization of this plant.  One good illustration of this shift can be seen through CNN medical correspondent, Dr. Sanjay Gupta.  Dr. Gupta publicly changed his position on cannabis use — discussing some unparalleled medical benefits  of the drug along with an overwhelming lack of side-effects.

Assuming that this trend continues, it will spawn new industries filling the void created by illegality.  Some examples are new foods, compositions, drug products, services, etc, discussed above.  The early stage of these industries makes them particularly exciting from a technology standpoint.  The technology is in its early developmental stages, so it is bound to encounter big leaps forward— pioneering inventions.  Accordingly, the cannabis technology field offers especially exciting opportunities for inventing and patenting new technology.

 

 

 

 

Sweat Equity in Exchange for Patent Services

Exchanging Equity for Patent Services

Some firms accept "sweat equity" in exchange for patent services

Some firms accept “sweat equity” in exchange for patent services

Should patent professionals accept equity (i.e., ownership, shares, or stock) in exchange for patent services?  Should startup companies offer patent professionals equity in lieu of cash payment for those services?  These sorts of “sweat equity” deals are somewhat common in many parts of the business world.  But, the legal community has been luke warm to the idea.

Sweat equity is a party’s contribution to a project in the form of effort — as opposed to financial equity, which is a contribution in the form of capital.  More recently sweat equity has been used to describe a party’s contribution to a project in the form of effort — as opposed to financial equity, which is a contribution in the form of capital.

In my opinion, patent professionals often walk into unique opportunities for getting in on the ground floor of newly developing technology companies.  However, investing in startup companies is often incredibly risky, so anyone entering such an agreement should be comfortable with the risk.

Patent professionals often find themselves in a unique situation when forming relationships with startup companies.  On the one hand, a startup company should file patent applications describing and claiming their technology before speaking to investors.  On the other hand, patent work is often very expensive, especially before the startup company gets funding.  It’s a catch 22: you need the money to do the patent work; but you can’t go chasing the money without first completing the patent work.

Waiting until after funding to file patent applications puts the entire enterprise at risk.  For a startup company, the patents are often the companies most valuable asset.  Speaking with investors before protecting that asset is very risky.  For example, the “investor” could steal or leak the technology to competitors with better resources.

One way to solve the above problem is to exchange owner’s equity for the needed patent services.  A few people have explored this area.  I’ve tried to summarize my findings below.

Equity for Legal Services

This idea of paying for legal services with equity is not new.  In particular, Christina Farr wrote about startups exchanging equity for legal services.  In her article, she points to Equity LLP, which exchanges legal services for equity.  In their words, “Cost. It’s free. All the legal work to launch your company in 3 months, plus a year of maintenance and advice. We are even working on securing a modest investment for every participant. We ask for a modest equity stake, typically 2% of founder equity.”

Gil Silberman, Founding Partner of Equity LLP commented that exchanging equity for patent services happens “[n]ot too often in my observation of Silicon Valley work, but it’s not unheard of either.  It might make some sense for a blue chip seed funded startup where there is a real possibility of the equity being worth something in a few years whether or not the patent itself ever issues or is strong.  It’s much less frequent with independent solo inventors, where the majority of inventions have no commercial value, the majority of patents are not economically viable, and there are several more steps to take before their idea could be commercialized.”

Patent Services on a Contingency Basis

Here is another discussion about why attorneys should think twice before agreeing to accept a share in the project in lieu of traditional cash fees.  This article takes the perspective of the patent professional and outlines many of the risks involved.  In short, taking equity in a startup company is a high-risk venture.  The patent professional should consider it akin to spending cash to acquire shares of a high-risk company.

Exchanging Equity for Services is Common in the Tech Accelerator Space.

Recently there have been an increasing number of technology accelerators.  For example,  Y Combinator and TechStars are considered to be among the best accelerators.  Most accelerators provide a stipend or small seed investment, mentoring, and workspace and professional services in exchange for an equity stake in the company. Typically the equity investment is around $25,000 and the equity stake is roughly 6 percent, according to Hochberg’s research.

Quirky offers a similar deal–exchanging a wide array of acceleration services for all of the patent rights.  If things work out, the inventor can hope to receive some royalties in return.