Startups and Intellectual Property (IP)

Lately questions about Intellectual Property or IP have been cropping up left and right.  Eliot Durbin (my partner at BOLDstart Ventures) and I had a long discussion this morning in preparation for his panel today about IP and patents.  Last week, we met with a company and when we asked about their core IP, they launched into a 5 minute discussion about the various patents they filed.  Do startups really think patents are going to make or break their business?  Yes, having core tech or IP matters but patents are a different question altogether.  Your best protection is continuing to focus on building your business, your product, and getting market share.  So what is my and BOLDstart’s stance on IP and startups.

1. We look at the team and the product and market first

2. We like to think that all of our investments have IP.

3. IP does not mean patent.  IP in our mind is your “secret sauce” for doing what you do better, cheaper, and faster than anyone else. Its great if you filed for a patent but that is a long process taking 18-24 months and by the time you get a patent the market opportunity may have already passed you.  Focus on building your product and market share, not on patents.  That is your best protection and competitive advantage.  Waiting for the patent office to tell you that you have a patent is a nice to have, not a must have.

4. Even if you have a patent, it takes tons of time and shitloads of dollars to defend.  Trust me, I’ve been there, and it seems to me that the only person making money in these cases are lawyers.  In addition when defending patents you will inevitably fight with the big boys with billion dollar balance sheets so that is not a place to spend your time and money.

5. Don’t start a company where there is already a patent battle brewing like email on phones.  We are looking for innovations, the next big thing, not yesterday’s way of doing it.

Hopefully that gives you a good perspective on our view on IP, patents, and startups. 

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8 Responses to “Startups and Intellectual Property (IP)”

  1. Brett Topche May 16, 2012 at 5:36 pm #

    Given this stance, is it logical to then say you view, in some cases, the existence of patent applications as a negative? If you view them as having minimal value, surely the money spent on patent applications to date could better have been spent elsewhere.

  2. Ed Sim May 16, 2012 at 7:34 pm #

    I wouldn’t say it is a negative, but I would say let’s not focus our discussion on whether your tech is great or not based on your filing for a patent. I would rather spend time looking under the hood and understanding more about your secret sauce from a technical perspective.

  3. Chris Durbin May 16, 2012 at 8:48 pm #

    Ed –

    very timely & excellent thoughts for me right now. I’m not dealing w/ patents, not even close; but your focusing the “IP” value-discussion away from a discussion of patents-filed and on the “secret sauce under the hood” – believe it or not – I get that; and it’s a very useful knowledge-moment for me right now.

    I’m more inclined to label my focus : intellectual capital, that is created by the secret sauce, and it’s pricing in the target market.

    Many thx.

    – Chris

  4. Bob May 24, 2012 at 5:34 pm #

    I agree with you. Having received several patents for Widgets and the $$ spent on getting them only to be able to get meeting to advance the product. If infringed by a bigger player, you will have to spend lots of $$$ fighting their attorney on a retainer. Lock up as much of the market share and be the best and stay the best by evolving your site.

    Bobby

  5. Shai Berger Jun 4, 2012 at 9:42 pm #

    I agree with your post, but point #5 had me scratching my head a bit.

    How can someone know where there is a “patent battle brewing”? Other than the big conflicts that make the front page (e.g. Google vs Samsung) it’s pretty tough to know what ground is contested.

    There are so many patents out there, so many licensing agreements and so many out-of-court settlements, that I don’t know how anyone without deep knowledge of a space would know where the battlegrounds are.

    In our space (call center enhancement) the landscape is really shaped by two companies that are aligned via a patent licensing agreement. But I didn’t know that until we got really involved. And I don’t know how I would have known. None of that info is published. Luckily, this hasn’t impeded us.

    My conclusion is…
    Assume there will be patents issues everywhere you go.
    Just find a market opportunity that matches your passion and skill set and go for it.

  6. Marty B Jul 18, 2012 at 2:47 am #

    It pains me to see an older guard who defend the need for patent protection, especially when the bio-this-and-that companies they invest in tend to survive on artificial grants.
    Your comments here are appreciated and not only shared by you, I see them as an advantage. Execution and being best in class cannot be understated. Plus, having customers defend your company is much less expensive than attorneys.

  7. Martin Jul 19, 2012 at 12:11 pm #

    That’s correct, its not easy to fight for patents and win at the same time. Its better to resolve your issues outside the court rather than wasting your money with lawyers.

  8. Ed Boyle Aug 20, 2012 at 10:14 pm #

    I’d like to agree with you but that might just require the market, specifically any future competitors of mine, to also agree with you. The reality is that growing a great product and getting great market share and making great money off a unique idea — all without any patents — invites competitors and/or patent trolls to attack you…and its gonna cost money to fight them off with or without patents. At least having some patents in your bag of tricks gives you something to use in your defense (or offense). When the law (soon) becomes “first to file”, it’ll become even more risky to invent & monetize a unique idea without attempting to patent it.

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