Why Patents Can’t Protect You
(And How to Succeed Anyway)

by Living On Dividends

Many entrepreneurs think that a patent can protect their idea while they get rich.

But they’re wrong.

Patents don’t protect anything these days. Patents only buy you time. How you leverage this time between your launch and your competitors’ response is what will make or break your success.

Remember the first ED drug on the market? The Big V, if you will. Not a single patent expired before competing big pharma companies swooped in to steal market share from Pfizer and created products with similar, um, utility. Pfizer knew that even a patent couldn’t protect their innovation from competition. So they launched a massive marketing campaign to capitalize on it as much as possible before competitors could respond.

Entrepreneurs don’t have this kind of budget for brute force entries. We have to act smart and really leverage the time between our launch and our competitors’ response, whether we have a patent or not.

So how do you best leverage such a head start?

1. Launch in a small market first, buy yourself more time.

This prevents attracting the attention of big dogs until you’ve had a chance to refine your product, gained inroads with your core customers, and often, even begun to cash flow from your idea. And the BEST part of launching first in local mom and pop shops and small chains? You’ll find out exactly what you product is actually worth in the market and avoid getting cheated by product buyers for the big retailers, which happens frequently to entrepreneurs. This is HUGE!

2. Establish a secondary competitive advantage different from your patent.

This could be a kick ass, ultra-intuitive user interface, an inventive marketing campaign that garners the love of the public (think iPod), low manufacturing costs, or anything else. The point is to use this time to develop an enduring competitive advantage beyond that provided by your patent. Because patents don’t last.

3. Become a well-funded competitor to establish an impenetrable first-mover advantage.

Your goal with this strategy is to move big before competitors can organize against you. You want to saturate the market with your brand and product so that two become synonymous with one another. Nobody ever says, ‘Hey, we can Voice Over Internet Protocol while you’re away!’ They say, ‘Hey, we can Skype!’ This is exactly what you want. If you can lure these big investors (venture capital, angel investors, or joint ventures with established companies), you’ll have to give up equity, but it can be well worth it to gain a share of a much bigger pie.

4. Don’t get a patent. Ever.

Coca Cola and Oreo never patented their unique formulas precisely because patents do expire. And when patents expire, your grandmother’s secret sauce becomes public domain. Would Oreo be worth billions today if Wal-Mart made chocolate sandwich cookies that tasted like the Real Stuff? Not a chance. If your product is hard to reverse engineer, this may be your best bet. But only if it is really, really hard to reverse engineer.

Would you do anything differently? How would you leverage a competitive lead?


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