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Patents For Hardware Products: When Do You Need Them?

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Patents For Hardware Products: When Do You Need Them?

Inventors, hardware startups, and other businesses with a new hardware product concept that they are aiming to bring to market are usually worried about protecting their product IP. One common question is about the need for patents for hardware products. For new product ideas, are they necessary, and, if so, when? There are differing opinions about the necessity of inventors getting a patent for their new product idea at an early stage, so who is right?

 

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IP protection Basics 1: Always sign an NDA when disclosing the product concept to people in the industry.

When you have a new product concept you may speak with industrial designers, potential manufacturers, distributors, etc, and you need them to sign an NDA because otherwise it could cause you problems when you later try to file a patent and it’s found out that you disclosed the product IP without protection.

This does NOT apply to potential customers, because you really need to get their feedback on the idea. (03:33)

 

IP protection Basics 2: These actions will get your product idea copied early.

When you put the product on Kickstarter, Indiegogo, YouTube, etc, if it’s a good idea that is attractive to copycats, it’s going to be copied even if you haven’t even launched yet. (04:58)

 

The different types of patents for hardware products.

  • Design patent: what it looks like — easier to get, easy to get around.
  • Utility patent: what it does – harder to get, harder to get around.
  • Provisional patent application (PPA), just 1 year, much cheaper, and then disclosure on the internet (the PPA is for the USA only). (07:14)

 

Approximate costs for patent applications and PPA timeline.

A design or utility patent application will probably cost somewhere between 10-50,000 USD and depends on how much work you do and how much the lawyer does, as well as their basic fees.

However, a PPA only costs around 2-300 USD and it gives you a year of protection before you need to commit to filing the proper patent.

You also need to take into account the cost of holding the patent. You have to pay to maintain it, and if you wish to prosecute a company that infringed on the patent it will likely cost tens of thousands as well.

In terms of timeline, before filing the PPA it’s important to do market research, find out the technical feasibility of your product, do some technical work, and get closer to a final prototype in order to maximise the one year of protection, otherwise, you may burn through that time too soon. The protection of the PPA will be most useful when you know your product has a market and is feasible and you are ready to go out to investors, do crowdfunding online, etc, and need to disclose the product idea. Hopefully, by the time the year elapses and you need to pay the larger amount for a full patent you’ve had a good response from the market, started selling, and maybe had a couple of production runs already. (10:39)

 

If patents are too expensive, what alternatives are there for protecting IP?

Some factories in Shenzhen, for example, can tear down and reverse engineer a product and get it onto the market very quickly, sometimes taking over the original product’s own market share before they have a chance to compete. If patents for hardware products are too expensive for you at an early stage, you can make it harder for copycats by doing the following in terms of product design and positioning yourself in the market:

  • Making your product harder to reverse-engineer. Obfuscate the firmware. Hide component markings. Add a layer of epoxy resin to the PCB.
  • Include features that copycats can’t include themselves, even if they’re able to make a product that is somewhat similar in terms of functionality, and your idea will be differentiated.
  • Create a high-volume, low-margin product that is fairly simple and that copycats are less interested in copying due to their inability to undercut you on price.
  • Create a product that is so premium that copycats can’t compete in terms of quality, even if they come out with something similar. (17:24)

 

The 2 main fears of people launching a new product.

Fighting against a large company and fighting against copycats are the 2 main fears.

  1. A large company decides to copy your product or bully you by filing a complaint to get you out of their market. A patent won’t really deter these companies as they have deep enough pockets to pay for the legal work! An example is Dyson vacuum cleaners which has had a number of very costly patent and copyright infringement lawsuits that almost bankrupted the company in its early days. Other larger and more established brands looked to capitalize on Dyson’s innovative technology and he had to fight them tooth and nail in court. Other examples of similar cases were between Nest and Honeywell, and even NOKIA and Qualcomm ended up fighting (although that was between two large companies, but a similar legal fight).
  2. A copycat copies your product rapidly. Companies that rapidly copy products and sell their versions far cheaper are a worry for inventors and businesses with new product ideas. If you have a patent you’re spending a lot of money early and can’t use it to grow the business. This puts you at a disadvantage to copycats who may copy the product and get it onto the market and undercut your price before you have had a chance to build up sales or even launch in some cases. The many thousands of dollars spent on the patent could be used on advertising and marketing that grows your presence and helps your company survive, for example, which could make a big difference. Also, patents are usually registered in the main countries of sale. A Chinese copycat is probably not going to care if your product is patented in the USA, for instance! (22:04)

 

 The dangers of going to investors and pitching your new product idea.

Investors may say that they’re interested in your idea and then turn it down, only for the same idea to hit the market later on. This is because they’ve assimilated your ideas. So inventors need to be careful to take precautions and speak to a lawyer before pitching. Andrew mentioned the example of an inventor who pitched his windshield wiper idea to the large US automakers who said no and then used the idea anyway – he eventually sued and won in court.

For B2B sales it is necessary to open up to your potential partners to a point, but for B2C sales you need to be very careful that competitors don’t have too much access to the product idea too soon. (33:32)

 

What to do if you have a ‘home run’ product?

A home run product is one that you know is going to sell and be a success. In some ways, it is probably quite differentiated from current models in the same market. In these cases, filing for a patent makes sense but getting investment to obtain the funds to keep the business going through the first couple of years first is still critical. Doing advertising with targeted ads to potential customers is a part of market research to help you to know if you have a home run, but since they’re not in the business it’s a safer way of collecting data that proves that your product is likely to be successful to investors. (36:37)

 

What if your product is not a home run?

A wildly successful and unique product isn’t the be-all-and-end-all. When doing market research you may find that your product fits perfectly into a market as an alternative option. In this case, you’re not necessarily disrupting the market, but you do launch a solid product that sells and is able to compete with current models. (39:17)

 

Which version of the new product really needs a patent?

Your initial product launch is V1.0. It’s useful for testing the market and making some sales. Patents for hardware products at this early stage are less crucial.

If it is moderately successful, the V2.0 can then be invested into and, in this version, you fix the problems of the V1.0. Here you will start to innovate a lot more and will then look at patents.

By releasing a V1.0 product that is less complex large companies are less likely to notice it and attack you allowing you to gain a foothold in the marketplace. They’re more likely to notice your V2.0 or V3.0 product which starts to be a lot more innovative, so this is where you will need a patent.

However, as our reader John Chisholm pointed out to us via email, you need to be careful about which elements of subsequent product iterations you’re planning to patent:

Any disclosure in the public domain negates the opportunity to patent at a later stage. You can’t put version 1 on the market, then patent version 2, only the unique features of version 2 that version 1 did not possess. If your version 1 possesses the main innovative features, I don’t see why anybody would try to patent a few additional features in version 2.

Of course, copycats may still take notice of a V1.0 product, but the methods explained above to protect IP are probably more effective than spending a lot on a patent at this early stage. (41:14)

 

The dilemmas you face: To patent, or not to patent, and when?

Patents for hardware products undoubtedly provide protection, but it must be noted that they put your product’s details and functions in the public domain for all to see. Staying ‘under the radar’ for as long as possible from the rest of the industry (not market research which is really essential), especially regarding unique technologies, can be very beneficial. GoPro is a great example of this because they were staying under the radar for 7 or 8 years to hone the product and make it great (with numerous versions already) before the competition found out about them when they took the existing camcorder market by storm. They didn’t patent the products or do advertising, for example, until they started doing their IPO, and didn’t become famous until they had already launched multiple revisions of the product that include their own algorithms for photos, chipset, etc. So they’re an example of a successful new hardware product that started without patents and built up to it once the product had sufficient sales, fame, and technology. (46:20)

John Chisholm makes another point here about when patenting is helpful:

As far as small players are concerned, I think the only valid reasons for patenting beyond [a PPA] are:

  1. Demonstration of conviction for the purposes of raising funds.
  2. A plan to sell out to a deep pocket that would have the funds to pursue both patent protection and infraction before the heavy costs of multiple standard patents come into play.
  3. Absolute conviction that the idea is worth a lot of money and that you will have the funds to defend the IP down the track.

I’m more convinced than ever that getting a good footprint in the marketplace is about the only thing that can protect the lone entrepreneur or small business. Many big companies ignore little people’s IP and wait to say if they are prepared to bankrupt themselves trying to fight them and the Chinese don’t seem to care one way or the other [about patents for hardrware products].

 

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Disclaimer

We are not lawyers. What we wrote above is based only on our understanding of legal requirements. QualityInspection.org does not present this information as a basis for you to make decisions, and we do not accept any liability if you do so.