Patents and Startups

I have mixed feelings about startups and patents.

  Patent Pending 
  Originally uploaded by Adam Mulligan.

I see many startups that believe their patents (or even patent applications) will be the primary reasons for their success.

I also see startups that don't pay any attention to patents whatsoever.

I think if you are a tech-based startup the answer lies in the middle. You can't rely on patents too much. It can be expensive to pursue patents. And it's very even more expensive to protect your patents. Suing startups (or worse big companies) to protect your IP is a daunting idea so don't count on that. Business execution is much more critical.

However even though the patent system is a mess it can be very strategic to find a great patent lawyer and patent key areas of your innovation. That goes for trademarks too. Done right it will help build more value and defensibility in your company

I wonder how the recent supreme court decision will impact the software world and startups. What do you think?

Comments

[Erik Schwartz]

We hate them. We feel that software patents are largely meaningless. Furthermore, by the time they're actually granted the company will have iterated the products that they defend so far that they wouldn't really be protection anyways.

Nonetheless we're filing provisionals on aspects of our system. We're doing these filings largely because we anticipate doing a VC round later in the year and they're another arrow in the quiver of the "so how is this defensible?" question.

The real answer is:

By the time our competitors copy us we'll have iterated and have an even better product. Our defensibility is that we're smarter, more driven, and more creative than our competitors.

[steve]

This varies a lot by industry. In pharmacology and gaming, for example, in the end no patents = no business. You have no choice. IP litigation is an everyday business tactic and you better be ready.

Business software and Internet apps, maybe less so. Maybe. Heck, Steve Jobs bragged in the most public (read: attempt to be scary) way that Apple has patented its iPhone innovations.

At the very least, any tech company should do extensive, super thorough and super smart research into "prior art" before it bets heavily on any new product or (supposed) innovation. Its just too darn easy and tempting for big companies and patent trolls -- and yes, innocent angered inventors -- to file litigation and crush startups, without winning -- without even getting to trial or settlement. Any IP litigator will tell you: if a company is sued for patent infringement it should budget $1-$3 million and 2-3 years to sort it out. Why so long and so much dough? Because the real crux of patent fights is in the appeals -- 60% of lower court patent decisions are overturned on appeal!

[Leigh]

I like what one lawyer said to me early on, “patents are a weapon, not a shield”. So, would you prefer to put your time and resources into suing someone or that same time and money into innovating your product and kicking your competitors butt across cyberspace (guess my preference).

However (oh there’s always a however with business types isn’t there?) similar to Erik S’s comment above, we are also filing some patents for our product. Why? For two reasons: 1. Because investors get all giddy about them (regardless of the fact that I tell them they are largely indefensible i.e. RIM). 2. Because I would rather have something to bargain with if we got into a legal pissing match with someone if they try and sue us.

[james]

I saw your information at http://sabet.typepad.com/bijanblog/2007/01/patents.html. Have you seen http://www.FreePatentsOnline.com ? The site might be a good resource to add. This site allows free patent searching, free PDF downloading, free alerts, and more. It is a good resource for intellectual property attorneys, patent searchers, scientists, and students.