20th January 2015

Should startups invest in patents?

News | Thoughts By 2 years ago

Toyota recently announced it would allow competitors to use their new fuel cell technology – patent free. This follows a similar move by electric car manufacturer Tesla, when CEO Elon Musk announced last June that competitors could make fair use of all Tesla patents without fear of litigation. On it’s own the Tesla announcement could be dismissed as an upstart company looking to make waves in an old world industry. Now an established player has also opened their patents, it puts a spotlight on the patent system and its influence on innovation.

Patents are a nice concept – I invent something original and if you copy my product I can take legal action. I’m motivated to innovate because my idea is protected. Unfortunately in the real world, the patent system can have a negative effect on innovation. This is particularly true in the startup space where (with motivation already plentiful) many companies don’t bother with them at all.

The protection a patent provides is mostly in its perceived strength. It’s only proven when it’s tested. As Elon Musk stated in the Tesla press release: “receiving a patent really just meant that you bought a lottery ticket to a lawsuit”. Enforcing a patent is a gamble as your patent could be overturned and you lose even the perceived protection. Another potential result is your opposition finding a patent of their own that you infringe and counter sueing you.

The patent system wasn’t designed for the rapid innovation of startups. Specifying an idea in the form of a patent, then staying within the bounds of that patent over time is unlikely. Within a few iterations you’ve innovated yourself out of the idea you paid to protect. Startups need to be able to pivot and focus on getting traction. Trying to keep to the patent can stifle innovation and growth.

Throw in patent trolls, international patents and the uncertainty around the patenting of software in general and you can see why some startups forge ahead and worry about patents later.

The current patent system isn’t going anywhere, it’s an industry in it’s own right and calls for reform have been ignored for a long time. Startups need to be aware of the system and manage the risks to their business without losing focus of the metrics that count and innovating to create the best product.

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