What is one of the first questions the Shark Investors ask the hopeful start up business owner contestants on the Channel 10 television show “Shark Tank”?
Do you have a patent and trade mark?
There have already been some amazing inventions pitched before the Sharks. Full of creativity and innovation, many of the business owners have developed a prototype for their invention and some have started trading prior to seeking investment from the Sharks. The contestants are not coming to the Sharks with just an idea. And lucky for the contestants that they don’t because it appears as though the Sharks are looking for more than just a significant percentage of their businesses. The Sharks are seeking what all investors seek – security for their investment.
For every pitch that generates interest from the Sharks, they ask the business owners about the intellectual property protection in place. “Do you have a patent and trade mark?” they ask. Most business owners, so far, have answered in the affirmative.
There are four simple reasons why intellectual property protection is so important to investors.
Protecting the intellectual property subsisting in inventions by registering patents, designs and trade marks gives the owner exclusive rights to use the invention. It provides the owner with exclusive space in the market place to exploit the invention and allows the owner to use the invention without fear that the invention will infringe the registered intellectual property rights of another. This provides operational peace of mind. Also, the rights allow the business owner to enforce its exclusive rights against others. It gives the business owner serious teeth to stop competitors exploiting a product, service or trade mark that is too similar to the invention or the chosen brand for the invention. This freedom to operate is invaluable to investors as it minimises risk. Exclusivity influences investment.
IP registrations prove the invention is inventive and distinctive. One of the threshold requirements to register a patent is that the investment must be new and inventive. Similarly, a design and trade mark must be distinctive. Therefore if the patent, design or trade mark has gone through the examination process with the Patents, Designs or Trade Marks Office, then the invention is deemed to have met those threshold requirements. This gives the business a competitive edge. A business that has a brand, product or service that is distinctive or inventive has great investment appeal. Being the first to market and the first of its kind is a crucial selling point and the objective of every investor.
3. Progress and commitment
The Sharks want to see commitment from the business owners, as does any investor. They want to see the business owner’s belief in the invention, the sacrifices made and the measures implemented to develop the business. The Sharks also want to see that the invention is significantly developed. A business owner can show that the invention is more than just an idea by registering the intellectual property subsisting in the invention. To register a patent, the full functionality and specifications of the invention have to be disclosed to gain protection. It requires a great understanding of how the invention works prior to filing the application and usually a prototype is developed for testing. To register a trade mark, consideration is required as to the marketability of the brand. The Sharks want to see how well the brand engages with customers. The further the invention and business is developed, the easier it is for investors to see the potential for success.
It all spells comfort for the Sharks to invest. If the invention is protected by patents, designs and trade marks, investors know the business has an exclusive space in the market place that is protected. They can put aside protection issues and focus on commercial considerations like the future profitability of the business and sales projections. Also IP protection demonstrates the commitment, belief and confidence the business owner has in its invention. After all, if the business owner hasn’t invested significant time and resources, the Sharks have made it clear that neither will they.
Michelle Dowdle is an intellectual property specialist with Sladen Legal.