In the past several years, the average popularity of patents has steadily declined among funded technology startups.
The likelihood that a startup will apply for a patent is largely dependent on the startup's industry and investors. Semiconductor and biotech ("hard tech") startups are over three times as likely to apply for patents than "soft tech" startups. In fact, although patents are declining in popularity overall, startups that have applied for patents in the past are applying for more patents. This suggests a desire but a minority of startups to build a patent portfolio.
Software startups are apparently much less likely to apply for patents. Many startup founders and investors are ideologically opposed to software patents. Competitors are less likely to sue for patent infringement in software than in other industries. Intellectual property lawyers advise against applying for patents because it is a poor investment of resources for a startup. Here are a summary of some commonly cited reasons:
- Software startups don't have specific ideas that are worth patenting. Their ideas are often a combination of existing ideas.
- Applying for a patent is often expensive, when you include time and attorney fees, especially if the patent application is initially rejected. It is also a distraction.
- Software patents can be engineered around, unlike pharmaceutical patents.
- Patent infringement is hard to detect and expensive to investigate. It isn't clear if the "secret sauce" of competitors infringes.
- Competitors may find prior art in order to invalidate or narrow the patent.
- Patent litigation is expensive and consumes time which is valuable for a startup. The startup may succeed, fail, or pivot long before the case is settled.
- Patent litigation in Silicon Valley can be bad for publicity and reputation.
- Startups are a risky business: three out of four startups fail to return investor capital. Patents are a last concern.
It's interesting that different types of startup companies have different stats for patent applications, but I suppose it does make sense since the nature of the invention is different. Seeing as software doesn't quite fit with the semiconductor and biotech startups, perhaps this is another reason why software shouldn't be patented and an alternative form of IP protection should be used in this case.
ReplyDeleteI also agree with Amy that an alternative form of protection is needed for software developers. A company definitely should not jump into applying for patents if it will not give them long term benefits or hinder their short term success. However, that does leave software companies at a disadvantage because it is open for other companies to copy their work. If solutions around this issue in the software industry already exist, please do share.
DeleteI think that software patents aren't filed for two main reasons.
ReplyDeleteOne, as you mentioned in the article, is that patents require capital, man power, and time. The reason software startups are so attractive to innovators and investors is precisely because of this lack of initial recourse drain. All you need is a really smart guy and a computer to have a software startup. Patents get in the way of that.
Two, software is very easy to copy, even with a patent. Thousands of different lines of code could produce the same result as each other and not be supported by a patent. If you patent a software method, it's way too hard to litigate. Instead, software companies build value for themselves by building their brands, not their patent portfolios.
Agreed. I think that startups see more value in trade secrets (keeping their secret sauce secret) and copyright, because they are easy to implement and easy to protect. How would they know if someone is using their patent behind the scenes when it's not visible to the user of a web application? Not only is a patent more cumbersome to file and enforce, a patent would require disclosing information that a startup might feel would be better protected by keeping it entirely secret with a non-disclosure agreement (contract).
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