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Understand Patents – A Complete Guide For SaaS Startups

Wondering how patents can impact your journey as a SaaS startup founder? As a fellow SaaS entrepreneur, I‘m sharing this comprehensive guide on how patents can benefit your funding, development, protection, and overall growth. Read on to unlock the power of patents for your startup!

An Introduction to Patents for SaaS Startups

Before diving in, let‘s quickly overview what patents are at their core:

  • Patents provide inventors with a limited monopoly over their invention in exchange for public disclosure.
  • This monopoly lets inventors profit from and control use of their invention for up to 20 years.
  • Patents must meet requirements around subject matter, novelty, non-obviousness, and utility to be granted.
  • Types of patents include utility patents on processes, machines, manufactures, and compositions.
  • Design patents cover ornamental designs while plant patents protect new plant varieties.
  • Software and business methods are generally eligible subject matter for patent protection.

Understanding these patent fundamentals lets you see how patents can strategically benefit SaaS startups. This guide will uncover the advantages at each stage of your journey.

Patents Help Attract Venture Capital and Funding

As a SaaS startup, one of your first hurdles is attracting venture capital and angel investors to fund product development. This table shows average funding amounts at various stages:

Funding StageAverage Amount Raised
Pre-seed$1.3 million
Seed$2.2 million
Series A$15.6 million
Series B$32.3 million

These sizable amounts are crucial for paying developers, deploying products, and jumpstarting operations. But how can patents specifically help unlock these funds?

  • Having a patent pending establishes your priority over the invention. Even though patents take ~31 months to grant in Canada, having a pending application signals you are developing truly novel technology.
  • This helps your SaaS startup stand out from competitors. Investors realize the expertise needed to draft quality patents, so your pending application makes you appear more legitimate.
  • Consider filing provisional applications in the US to secure priority before needing to file full applications within a year.
  • According to an investor survey by OpenMine, patents were the second most influential factor when making funding decisions.
  • Displaying your dedication to IP protection through patents increases your valuation. One study found every patent boosts valuation by ~3% on average.

In summary, having strong pending patents acts as rocket fuel for attracting crucial early funding as a SaaS startup.

Scout the Patent Landscape Before Development

Savvy SaaS founders tap into patents well before writing their first line of code. Performing clearance searches provides tremendous value:

  • It allows scoping the patent landscape around your envisioned product, revealing existing patents in similar fields.
  • This highlights potential infringement risks from overlapping technology so you can adjust course.
  • You can shape a patent strategy to pursue improvements and carve out patentable advancements.
  • It also evaluates if patents align with your overall IP strategy and goals.
  • Searching databases like Espacenet, Delphion, and the Canadian Patent Database is a starting point. Also search academic literature.
  • Alternatively, hire a patent search professional to thoroughly probe the prior art around your planned offering.

Adjusting your IP and development strategy based on these landscape insights will pay dividends in avoiding costly litigation. It also boosts your prospects of obtaining truly novel and defensible patents.

Patents Protect Your Technology from Copycats

Your efforts don‘t cease once you successfully obtain patent protection. Competitors and copycats may try exploiting your patented technology. Here is where enforcement comes into play.

  • Your granted patent provides exclusionary rights over your invention for up to 20 years in Canada.
  • This means only the patent holder can make, use, sell, construct, or import the invention.
  • If competitors appear to infringe, you can take legal action to protect your SaaS solution.
  • Remedies include injunctions, damages, and accountings for any profits the infringer earned.
  • From 2010-2019, over 2,000 patent cases were filed in Canada, indicating a willingness to litigate.
  • Prepare by understanding infringement analyses and building a litigation war chest. Strong patents are your best asset.

Leveraging patents this way maintains your competitive edge and prevents dilution of your market share. They help sustain long-term value for your SaaS startup.

Patents Can Aid Your Licensing Efforts

Once established, you may decide licensing your patented technology provides an additional revenue stream. Here patents enhance your negotiations.

  • The improved exclusionary rights gained under Canada‘s new patent rules make cross-licensing more attractive.
  • Documenting your protected technology in patents provides clarity in hashing out licensing agreements.
  • The inherent value of patented technology increases your leverage when negotiating favorable terms.
  • Prepare valuation models detailing addressable market size, revenue projections, and comparables.
  • Draft contracts clearly delineating licensed fields of use, territories, payment structures, and other bounds.

When executed strategically, patent-protected technology can provide profitable licensing opportunities as your SaaS startup scales up.

Conclusion: Patents Offer Multiple Benefits for SaaS Startups

As outlined in this guide, patents provide advantages to SaaS startups throughout your journey:

  • At the fundraising stage, patent applications attract investor capital by signaling innovation.
  • Probing the patent landscape early allows tailoring your IP strategy to avoid infringement.
  • Once granted, patents protect your technology from copycats aiming to free-ride off your R&D.
  • Patents enhance negotiations when licensing your technology to generate additional revenue.

I hope this breakdown has helped illustrate the diverse benefits patents can offer at each phase. Don‘t hesitate to reach out if you need any tailored guidance on patent strategy as a SaaS founder. Wishing you huge success!



Michael Reddy is a tech enthusiast, entertainment buff, and avid traveler who loves exploring Linux and sharing unique insights with readers.