Because of the expense of patenting in the United States, it can be a challenge for a startup to determine whether or not to seek patent protection. Some argue it's waste of money because even if a patent is obtained a startup cannot afford to enforce patent rights. If enforcement makes economic sense and the startup IPOs, it can afford it, and if the startup is acquired, the acquiring company typically has more resources.
Some argue in favor of patenting as a way to increase investor interest. For example, here's support for that view: Farre-Mensa et al., What is a Patent Worth? Evidence from the U.S. Patent "Lottery". As stated in the abstract: "We provide evidence on the value of patents to startups by leveraging the random
assignment of applications to examiners with different propensities to grant patents. Using
unique data on all first-time applications filed at the U.S. Patent Office since 2001, we find
that startups that win the patent “lottery” by drawing lenient examiners have, on average,
55% higher employment growth and 80% higher sales growth five years later. Patent
winners also pursue more, and higher quality, follow-on innovation. Winning a first patent
boosts a startup’s subsequent growth and innovation by facilitating access to funding from
VCs, banks, and public investors."
Copyright © 2018 Robert Moll. All rights reserved.
