When an entrepreneur’s efforts to launch a small business include an invention, seeking patent protection may be in order. This is not always a seamless process, and there has been a disturbing trend of “patent trolls” eager to try to squeeze money out of businesses that want to avoid lengthy and costly litigation.
But for small businesses pondering patents, there can be benefits. Here’s a look at a few of them.
This is the primary and obvious reason for seeking a patent. The protection means that “others can’t make, use, sell, or offer to sell your invention in the United States or import your invention into the United States,” as the Small Business Administration says. And the SBA’s website says that small businesses can be at risk, because entrepreneurs may not be well-versed in patent protection.
“Particular industries, including manufacturing, consumer goods, technology, software, and biotechnology, are hit the hardest by intellectual property (IP) theft,” the SBA’s site says. “Small importers and exporters should also take precautions to protect their property — the U.S. Department of Commerce warns that any small business that exports its IP-protected products abroad or sources its products or parts overseas must take into account the potential for rampant intellectual property theft in many countries.”
It’s ‘a signal of quality.’
Businesses with established patents may have a better chance at attracting capital investments. David Pridham and Brad Sheafe of the patent advisory firm Dominion Harbor Group write about this for Forbes.
“According to The Role of Patents in Venture Capital Financing, a study by Haussler, Harhoff, and Muller, ‘Patents are a signal of quality that facilitates access to financing and helps startups overcome the liabilities of newness.’ This finding was confirmed by the 2008 Berkeley study Patenting by Entrepreneurs: An Empirical Study, which found that 67 percent of venture-backed startups reported that patents had been vital for them in securing investment. While 40 percent of all startups held patents, 80 percent of those receiving venture capital investment owned patents.”
It can boost market share.
A brilliant invention may not get its due without a patent. Pridham and Sheafe explore this in their Forbes piece by focusing on an inventor named Carles Puente. He invented “a mobile phone antenna, based on principles of fractal geometry,” they write, which allowed phones to shrink in size.
“If it weren’t for Puente, we’d still be carrying around cellphones as big as shoes. But his Spanish startup, Fractus S.A., couldn’t possibly manufacture enough fractal-based antennas for the 1.5 billion smartphones sold each year. Thanks to its patents, however, Fractus was able to license its technology to 90 percent of the world’s smartphone makers. ‘Patents were very important to us,’ Puente says, ‘not only in protecting our innovative technology but also in expanding our market share.’”
It can lead to big things.
Can a patent be the key to a “billion-dollar empire,” as Pridham and Sheafe write? In certain cases, it has done just that. They cite a story by IPfolio’s Rupert Mayer, which shows the actual patent filings of some now-corporate giants.
“These include Dropbox’s network folder synchronization patent, Zynga’s asynchronous challenge gaming patent, Square’s patented system and method for decoding swipe card signals, GoPro’s patented harness system for attaching a camera to a user, and of course Google’s breathtakingly valuable original PageRank patent.”