Start-Ups: Should you Patent?

Are you a start-up? How much attention are you paying to your proprietary technology?

TECHCRUNCH compiled a patent activity database of over 12,000 funded technology companies. They then plugged the data into a metrics tool to make the data more understandable.

Here is a summary of the results:

  • One third of all funded companies have filed a patent application.
  • 19% of all funded companies filed at least one patent application prior to receiving any funding.
  • Since 2005, the average start-up has become less likely to apply for patents than companies founded in the previous year.
  • Companies in the semiconductor industry are most likely to apply for patents (65.2%) and companies in ecommerce are the least likely (10.5%).
  • Among firms that have invested in at least 100 companies, those with the most patent pursuers in their portfolios are DAG Ventures (59%), Menlo Ventures (57%), and Kleiner Perkins (56%).
  • Outspoken anti-software-patent investors Brad Feld (Foundry Group, 26.2%) and Fred Wilson (Union Square Ventures, 18%) practice what they preach — they have fewer than average patent pursuers in their portfolios.

Conclusion

The average popularity of patents has steadily declined over the last few years among funded technology startups.

Why an individual company may choose to apply for patents is complicated, but there is influence via a few key characteristics.  A company’s industry and investors, for example, appear to be meaningful indicators of their likelihood to apply for patents.

Despite the overall decline in application activity, those companies that have chosen to pursue patents have done so more aggressively than ever. This is indicative of the increasing dichotomy in the marketplace, in which some thought leaders are actively speaking out against certain types of patents while patent portfolios are being bought and sold for lucrative amounts.

RWR Analysis: To Patent or Not to Patent is a key question you should really ask thoughtfully and deeply when embarking on any business venture.  If you have proprietary knowledge firstly make sure it is proprietary and secondly do a SWOT analysis on the “value” of a patent and whether it is safe to patent later or not at all.  If there is real value in your knowledge and you can leverage this quickly then it may be best to hold on to that information and protect yourselves with a patent.  Remember there are other ways to protect knowledge but make sure your communication processes are water-tight.

Useful Reading:

The Patent, Used as a Sword: Thousands of executives and companies are caught in a software patent system that judges, economists, policy makers and technology executives say is so flawed that it often stymies innovation.

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