Patenting Technologies – A Cost-Benefit Analysis

February 19, 2007 at 7:56 pm 2 comments

Every start-up idea that I have listened to, at some point touts patenting the technology as a defensible measure against competition. At the same time, every investor who has any experience in the world of web technologies says that patents are basically useless and businesses should have other competitive advantages.

From my experiences in this arena, and from fighting from deep within the trenches, I can tell you that most business method patents won’t help you fight off competitors. As it is, companies competing for the same space usually take very different approaches. Secondly, as I have written about before, ideas are really just 5% of the difference between success and failure. It mostly comes down to execution, distribution and market trends, not patents on an idea.

So then why patent your revolutionary new technology? It comes down to scalability, fund raising, and ego.

Scalability:

If you do come up with the next big idea, and you are able to execute and build a huge business, then you will look back at the 20k you saved by not patenting your technologies and most likely cry. Patents might not help you get to superstar status, but they can help you stay there by threatening potential competitors with the threat of a lawsuit (something you can’t do as a start-up with a limited budget).

Fund Raising:

Even though VC’s say they don’t care about patents, they most certainly do. Approach any of them with a pitch and if you don’t have at least a provisional patent they will want to know why. It seems like a lot of times, investors feel more secure in their investments if there are tangible assets that they can turn to for protection.

Ego:

Who doesn’t like to think of themselves as a creative genius who has a patent under his or her name? Though I am pretty sure it feels a lot better to have built a viable and successful company than it does to have your name on a useless patent.

Conclusion:

A patent doesn’t make a lot of sense in the near term when resources are tight for a startup and it won’t get you to the big-time. But not filing for a patent can turn out to be a huge short sighted mistake that investors will hate.

So go ahead and file for a patent, but understand that it is a long term move that won’t help you fight off those competitors until after Google buys you out…

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Entry filed under: Start-up.

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2 Comments Add your own

  • 1. bisi  |  March 1, 2007 at 1:59 pm

    I have often wondered about BM Patents . Do you have any ?
    Do you know of any examples of BM Patents apart from the Amazon 1 click ?

    Reply
  • 2. EP  |  March 1, 2007 at 4:25 pm

    We don’t have any full patents as of yet, but we are pending on some.

    BM patents are notoriously difficult to come by, but there are a bunch of other cases out there.

    Reply

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About

Exactly one year ago I set off on the most exciting journey of my life; I started Emerging Demographics Inc (the parent company of HireWorkers.com).

Along the way I was selected as one of the top 20 young entrepreneurs by BusinessWeek.com and the 21st coolest young entrepreneur by Inc. magazine. I have also appeared in ABC7, Telemundo, NPR, and been quoted in StaffingIndustry.com, WorkforceManagment.com, Entrepreneur Magazine, and various other publications.

Over the next few months I will recount some of the stories and lessons learned from building, developing and creating a business from scratch.

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