VC Cliché of the Week

We were in a meeting yesterday and were talking about patents.

We were debating the usefulness of patents as a business matter and I dropped my favorite line about patents on the group.

Patents are like nuclear bombs, you just got to have some.

I have never seen patents make a business, but I have seen lack of patents hurt a business on many occasions.

So this line, given to me by a patent lawyer about ten years ago now, strikes a chord in me.

IP battles are like the cold war.  Those who have patents can keep others honest because nobody wants to start a war that might end in everyone's destruction.  But those who have no patents are sitting ducks and don't have the weapons to keep others honest.

So my advice to entrepreneurs is always file a bunch of patents.  But don't expect that they'll ever do more than keep others at bay.

Comments

[Alex Rowland]

Hey Fred,

I agree that patents can be a useful speed bump to slow down competitors. My biggest problem with patents from a business standpoint is the expense of defending them. In the early stages of any business, cash is obviously in critical short supply. Spending that capital on patents before gaining access to VC funding can sound like a good idea (VCs do tend to like defensible IP), but the problem is that patents are useless unless you have the financial capacity to defend them. If Google uses your model to exploit a market opportunity and you have the patent on that business process, technology, etc. good luck prevailing without the financial resources to at least go through the first couple of rounds with Google's legal team. It seems to me that patents are one of the first things that a VC should be pushing for once the business has achieved enough traction to generate revenue (and likely future earnings) and therefore justify investment, but doing so beforehand makes too many assumptions about the overall importance of the IP most entrepreneurs seek to protect.

[Megan Kamil]

I agree with Alex, however start-ups can file a provisional patent w/o attorneys for $100. My start-up met with about 10 attorneys to get advice about what to do and not to do in a provisional, then following the layout of similar patents online we filed.

Although I agree it's not the best solution, it's better than nothing and cost effective enough for a start-up.

[Wyly Wade]

Being a partner that funds largely on the quality of patens I would agree that if you do n't have patents then your business is worth a discount to the potential.

It is always good to end up with a portfolio around your actually property so that you are protected from derivitives. This then allows you to protect and hammer on other firms that are even close to your ip space.