What do Dropbox, cloud-based Office 365 and ZenDesk have in common? All three are Software as a Service (SaaS)-based technologies. The SaaS industry is worth US$171.9 billion and has grown over five times in the last decade.
A 2020 survey by BetterCloud suggests that SaaS applications account for 70% of the business applications used. The SaaS industry is projected to grow another 17% in 2022 alone, representing an attractive business opportunity for SaaS startups.
Emerging SaaS startups looking to make their mark in the SaaS space may face several challenges.
First, how might SaaS startups raise capital for their business operations and commercialization of their technology?
Second, in a digital age of fast-evolving technology, how might SaaS startups maintain their competitive advantage and ensure other competitors do not make the same technology?
Third, how do SaaS startups mitigate legal risks when developing their technology?
Fourth, after the launch of their technology, how could SaaS startups allow users to access their technology securely without compromising their intellectual property?
The use of patents may address all four challenges.
How Might Patents Be Beneficial To SaaS Startups?
Patents provide a time-limited, jurisdiction-specific monopoly right for an invention in exchange for disclosure of that invention.
In Canada, for an invention to be patentable, it must be of patentable subject matter, novel, useful, and non-obvious. Patentable subject matter includes manufactures, compositions, machines, processes, or their improvements.
Patents Are Valuable Business Assets
Patents can be a worthwhile investment for SaaS startups – they can be leveraged to raise venture capital or other funding. In Canada, it takes an average of 31 months to obtain a patent from requesting examination.
Prior to obtaining a patent, startups may use “patent-pending” to market the technology described in their patent application. Patent-pending status may signal to investors that the technology may be innovative, increasing the likelihood of securing investor funding.
Discussions with investors may lead to the disclosure of the invention, which can prevent the grant of a patent. Patent applications can help mitigate risk associated with those discussions and safeguard a startup’s ability to own the technology later.
For example, filing a US provisional patent application is a way to secure a filing date, which may later be relied upon in a priority claim when filing a non-provisional (regular) patent application.
Patents Protect Against Infringement Of Startups’ Patented Technology
In Canada, patent holders have an exclusive right to make, use, construct, and sell their patented invention typically for a period of 20 years from the filing date of the patent application that was granted.
Suppose competitors of SaaS startups infringed the startup’s patent by, for example, copying their patented invention without permission.
In that case, SaaS startups may exercise their patent against infringing competitors to maintain their competitive advantage and prevent dilution of their market share and profits.
Due Diligence Search Prior To Patent Application Informs Intellectual Property Strategy
SaaS startups can benefit from probing the patent landscape early before extensively developing their technology.
Prior to filing a patent, many inventors will seek a patentability assessment to investigate the likelihood of obtaining a patent for their proposed invention.
A patentability assessment can reveal existing patents and technologies similar to the proposed SaaS technology. It can inform a startup prior to investing resources to prepare and file a patent application only to find that its technology may not be patentable.
By developing an intellectual property strategy early, SaaS startups may also avoid the liabilities of infringement, and will be able to channel time and resources more confidently into shaping their technology in a manner that is less likely to be infringing, and more likely to result in a patent.
Patent Applications May Help With Drafting SaaS Agreements
SaaS startups can minimize the risks associated with user access of their software by clearly identifying users’ access rights and its limitations.
Through the technical work involved in preparing a patent application, SaaS startups may gain additional insight into the contours of their technology, which may contribute to better defined user access agreements to help safeguard all aspects of their technology.
For more information about SaaS, we also wrote SaaS business model: how it works you might want to read.