Patent value for startups: key barrier to competitors

“In business, the competition will bite you if you keep running, if you stand still, they will swallow you.”

- Victor Kiam

Patent landscape in every high tech field today is much skewed with startup companies finding themselves at lower end of the landscape due to high competition from large companies covering the field with their patent portfolios.

A research article by NUS Singapore shows that in the last ten years, the patent applications filed by startups to that of large MNCs in the high tech segment were in the ratio of 1: 89.

While large companies with sufficient financial resources file for patents from an offensive stand, for e.g. to generate licensing revenues, initiate lawsuits etc., for a startup company filing a patent matters from more defensive perspective.

General trends show that majority of startups in high tech field are vulnerable to patent lawsuits or license settlements from large MNCs, however the same is not the case with startups owning patents.

A report by USPTO states that, while the merits of product features and functions are considered to be primary factors by investors and venture capitalists for funding a startup competing against behemoths, patent exclusivity comes as a second most important factor in the form of a defensive, protection measure and as a revenue generating asset at a later stage.

In my opinion, the primary objective for a startup should not be to get a patent in order to attract investments or enforce the patents on other competitors. This is so for the following two reasons:

  • Patents are not the only factors responsible for getting investments/ funding rather they are supplementary
  • Enforcement and taking up patent litigation lawsuits are a costly affair for a startup and therefore not advisable

What actually matters for a startup company in the initial stages is to protect its pioneering product/ technology from getting copied out in the market and secondly ensuring that the product itself does not fall under the scope of any patents owned by competitors which largely constitutes of big companies and non-practising entities.

 

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