New Evidence Shows That Patents Matter Less And Less For Startups

from the indeed dept

I was recently at a "tech" conference that focused on entrepreneurs, and I watched a panel discussion on "legal issues" where the first speaker went on at length about why startups absolutely needed to apply for patents as soon as possible. He argued that so much of a company's value was "tied up" in its "intellectual property" and you absolutely needed to "protect" it or the company could just be copied. This shows a fundamental misunderstanding of true value. The idea, by itself, is somewhat meaningless. The real issue is the execution -- and no matter what you know about the idea, the actual execution is always a lot more difficult. Focusing on "protecting" rather than executing can actually be the death of a startup.

Thankfully, it looks like more and more startups in the "soft technology" realm are recognizing this, and are getting fewer and fewer patents. TechCrunch has a post by patent lawyer Leonid Kravets who did a study of patents and funded companies, and found that each year over the past few years, startups seem to be getting fewer patents.
It may be tough to tell from the chart, but basically, each year shows fewer patent applications from startups. There's a ton of other interesting data at the link above, including some differences between certain investors. Not surprisingly, corporate VC wings seem to like companies with patents (a very big company mentality). Whereas VCs that have been investing in some of the most successful startups today (like Accel, which funded Facebook, and Union Square, which funded Twitter, Kickstarter, FourSquare, Tumblr and many others) have a much lower number of startups they invest in that have patents. Those VCs seem to recognize that it's not the patents that matter, and the general success of both of those firms' portfolios suggests they may be on to something.

Filed Under: entrepreneurs, intellectual property, leonid kravets, venture capital
Companies: accel, facebook, foursquare, kickstarter, tumblr, twitter, union square

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  1. icon
    Gene Cavanaugh (profile), 4 Jul 2012 @ 8:54am

    Patents mean less to startups

    Well, we can spin it the way we want to see it (currently the "American way", where we simply do the Reagan thing, "Believe with your heart" aka "Be stupid, so I can give your money to the wealthy").

    OR, we can recognize the truth (anyone listening? Oh, I forgot, "Believe with your heart").

    The truth is, if anyone cares, that the USPTO has bought into a "revenue vs performance" model - them that pays a lot gets a lot. So, small entities that file as small entities (or even if they file as large entities, and can't stand the expense of "continued prosecution") find that their inventions, no matter how novel, are rejected out-of-hand, and examiners that don't - get bad reviews and eventually are canned.

    So, patenting has become an impossible dream for small entities. That gives the patent trolls and anticompetitive large entities the power they have always lusted after.

    And, note: I am an IP (aka "patent") attorney.

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