Why should startups care about patents?

Spend enough time on the internet and you will find arguments both for and against startup 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 you should get a patent to protect your innovation from being copied. Which is the smarter approach? Can you rely on any data, as opposed to anecdotes, to arrive at a wise decision about patenting? (Full disclaimer: I am a patent attorney, but you don’t have to hire me to agree with me.)

Patent pending for raising capital

Notice I did not state granted patents. Filing patent applications, even without the certainty of knowing whether or not they will get granted, 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, they are often on the receiving end of a patent infringement litigation. Having a family of patents with broad coverage of various aspects of their innovative technology can prevent or discourage others from asserting patent infringement claims against a startup.

How startups can defer patent costs

If your early stage company currently does not have thousands to spend on a utility nonprovisional patent application, why not first file a provisional patent application (PPA) and buy yourself a year’s worth of time? After filing the provisional, you can hustle to close with investors as you continue developing the product. Keep in mind that the back-dating benefit of a provisional applies only to the content contained in your provisional application. Any new matter added to a nonprovisional application does not benefit from the earlier date. Startups should not rely too heavily on provisionals especially with the risk of the disclosure being skimpy, but even a less than perfect provisional is better than nothing.

When it comes to the costly nonprovisional patent application, our firm offers flexible payment options for qualified clients, including paying our retainer by credit card. Another payment option would be to pay half of initial filing cost upfront, and pay the remaining half in monthly installments without interest over a fixed period of time.

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.

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Vic Lin

Vic Lin

Startup Patent Attorney | IP Lead Partner at Innovation Capital Law Group
If you are a startup or small business, we want to help. Our mission is to equip entrepreneurs with solid IP rights that facilitate funding, growth and sales. Let's get to work! Direct: 949.223.9623 | Email: vlin@icaplaw.com