Patent Pending vs. Patent Granted: What Investors Actually Care About

For founders and startups, securing a patent is a major achievement, and most owners highlight the term “patent pending” on their websites and portfolios. Although this can increase the company’s credibility, investors want to safeguard their investment. But there is a broader meaning to the term "patent pending" and “patent granted” that most investors do not know. Additionally, it's important to know exactly what that word tells and doesn't tell an experienced investor about your company if you're depending on it to close an investment.

Let's dive in to get a clear picture of the real difference between a pending patent and a patent granted one, and what actually motivates an investor when he/she is deciding whether to write you a check.

Patent Pending: Understanding the Term

The term simply means that you have filed an application with a patent office. The primary step is reviewing the paperwork, then comes the examination, review, and approval of the innovation. For example, in the US, the patent application can sit in the system for two to four years before getting a final approval. During the waiting period, you are allowed to use the term “patent pending,” but it is not guaranteed that you will ever be granted a patent. Some applications get rejected outright. Other applications get filtered out, so in the end the original filed patent protection is altered altogether when the authorities finalise it. For a brand owner, the status is restrictive. It signals to competitors not to copy the brand because it can cause you trouble in the future. But, from an investor's perspective, it gives a vague idea.

How to interpret “Patent Granted”?

When a founder is granted a patent, that means a patent examiner has assessed your application, examined it against existing art, publications, and inventions, and concluded that your innovation is novel, worthwhile, and unapparent. The government has now given you an enforceable legal right to stop others from making, using, or selling your invention for a set period, typically 20 years from filing.

This is a real, tangible asset. The granted patent is collateral, further sold, licensed, and protected from court proceedings. The final patent has cleared the inspection stage. A pending one hasn't yet.

What Concerns the Investors?

This can interest most of the investors. Investors rarely make decisions based on patent status alone. What they care about is what the patent situation says about your business. A few things they're really evaluating:

• Is it only a filing, or is there a genuine trench?

Investors are curious whether your intellectual property is defensive enough to provide them an economic advantage. A pending application is a promise of a moat. A granted patent is proof of one. Particularly in industries like software, where patents take years, and the market moves quicker than the patent office, early-stage investors frequently accept "pending" as a substitute. However, investors anticipate real protection or a reliable route to it when you raise subsequent rounds, particularly the second series and beyond.

• How strong is the claim scope?

A patent that is issued and has well-written, extensive claims is significantly more valuable than one that has limited claims that are readily circumvented by rivals. These assertions are not just the preface, will be read by experienced investors or their technical advisers. A patent that only protects a tiny, specific implementation detail offers little real protection.

• Freedom to Operate

Investors are also concerned about potential patent infringement by your goods. A rival who already has a patent granted in the same field may still sue you even if your application is pending. Founders frequently ignore this, but due diligence closely examines it.

• Is intellectual property fundamental to the company plan, or is it only a bonus?

Patents tend to be used by companies in advanced tech, biotech, and hardware. Because the full price may depend on patent status, investors will delve deeply into the matter. Traction, network effects, and execution speed are considerably more important in consumer apps or markets than patents.

• Timeline and Burn

Investors also think practically. They will inquire about your competitive position if your patent is pending and won’t be approved for another three years. Is it possible for a rival to introduce something comparable before your protection is approved? ‍

Conclusion

“Patent pending” is a signal of intent and effort. “Patent granted” is a signal of legal strength. Investors are aware of the difference and will inquire about it, particularly as your business grows and the risks increase. Don’t oversell a pending application as though it were finished if you’re the founder. Instead, demonstrate your understanding of freedom-to-operate hazards, be honest about where you are in the process, and outline your plan for creating a true moat. If you are a creator and patent filing is troubling you, do not fret! Brealant and its team of IP experts will navigate you successfully through the process of IP applications.