Businessweek recently featured a technology startup company, Tactus, and its early-on strategy to protect its inventions with patents, with related costs ranging from $15k to $40k per patent. Generalizing from the specific, the article implied other startups should adopt the same strategy, protecting themselves “with bulletproof intellectual property portfolios that can take years to build,” as a result of recent patent wars and NPE (non-practicing entities) activities.
Techcrunch decided to examine the issue of whether entrepreneurs are getting caught up in the patent-filing whirlwind. The data shows entrepreneurs are less likely to file for patent protection than in the past, but patent rates vary greatly by industry.
Our findings show that 33% of all funded companies (4,050 of 12,404) have at least one published patent application, but patent rates vary greatly by industry. Companies in the semiconductor and biotech industries have the highest patent application rates (65% and 62% respectively). Companies in these “hard tech” industries require significant investments at very early stages and their patents are more commonly used to defend intellectual property. Conversely, “soft tech” industries like ecommerce, web, and video games have patent rates below 20%.
Jackie Hutter, MS, JD describes herself as a “recovering patent attorney,” and now advises early stage companies on their IP strategies. In her IP Asset Maximizer blog, she argues that most startup companies have more compelling needs for the cash than filing patent applications.
Citing Vonage as an example, Utter argues that “no reasonable startup should base business success on the ability to prevail against a competitor after spending millions on litigation–especially when adding the opportunity costs and market uncertainty that results from such a business strategy.”