Why should startups care about patents?
Spend enough time on the internet and you will find arguments both for and against startups filing patents. One side argues that patents take too much money and time, and that startups would be better off focusing on execution. The other side argues that patent filings provide startups with several benefits that outweigh the legal costs. Which is the smarter approach? Can you rely on any data, as opposed to anecdotes, to arrive at a wise decision about patenting for startups? Actually, you can. Let’s look at some data that address the question of whether startup patents are worth pursuing.
And, yes, I am a patent attorney. I do not purport to be unbiased. Now that we’ve got that disclaimer out of the way, let’s dig into what prior studies have shown.
Will patent pending help raise capital?
It may surprise startups to realize that having patents granted might not be the key factor in raising capital. Being patent-pending is what matters. Filing patent applications, even with all the uncertainty of the patent process, will improve your probability of receiving funding. According to this 2008 Berkeley Patent Survey, patent filings play a significant role in securing venture capital funding for technology startups. Venture-backed startups had a median of six patents or patent applications while the median startup without venture capital held no patents or applications. VCs clearly prefer to invest in tech startups with patent-pending technology, and they’re not alone.
The survey also found that patents appear to increase the probability and quality of a liquidity event, which would incentivize investors to fund startups choosing to patent.
Startup patents for offense and defense
Much has been said about the astronomical costs of enforcing a patent. What’s lost in the discussion of the offensive purposes of a patent is the defensive value of a strong patent portfolio. Startups are unlikely to initiate expensive patent lawsuits against competitors. Instead, they are often on the receiving end of a patent infringement litigation. Having a family of patents with broad coverage can prevent or discourage others from asserting patent infringement claims against a startup.
Do consumers care about IP?
Studies show that the vast majority of consumers care about authenticity. So how do IP rights, such as patents and trademarks, affect consumer perceptions on whether a product is the real deal? If a consumer is faced with one product that is patent-pending and another option that is not, what perceptions of authenticity would the patent-pending status provide?
Surveys have revealed that most consumers recognize that patents are necessary to promote innovation. So consumers get the connection between patents and innovation.
Keep invention confidential until after patent filing
If possible, it’s best to keep your concept confidential until after your patent application is filed. This preserves your ability to file foreign patent applications and reduces the risk of someone else beating you to the US Patent Office.
A better alternative to startup patents?
I would agree that startups may want to forego patents in certain situations. For example, if the lifespan of the product is only a few years, then a utility patent might not be worth the time and expense unless there is value in licensing the technology.
Another factor might be the difficulty in reverse engineering the technology. If you believe your technology can be maintained as a trade secret, then patenting might not make sense.
