Patents and startups, a little advice

So today I was cleaning out FeedDemon and happened across this talk Paul Graham gave to Google. It is filled with gems and I’m going to dissect what I found important, especially as it relates to ISVs and maintaining control of your IP. If you’re like me, an abridged version is most favorable when the creative juices are flowing.

“Applying for a patent is a negotiation. You generally apply for a broader patent than you think you'll be granted, and the examiners reply by throwing out some of your claims and granting others.”

This one is probably a given, but a good starting point. From latest numbers coming out of the USPTO it can take on average about 3 years to receive a patent and as Paul indicated, it will usually be a negotiation process to produce a slimmed down version of the original patent application.

“Like nuclear weapons, the main role of big companies' patent portfolios is to threaten anyone who attacks them with a counter-suit.”

“Business is a kind of ritualized warfare. Indeed, it evolved from actual warfare: most early traders switched on the fly from merchants to pirates depending on how strong you seemed.”

I’ve noticed and most notoriously, on Slashdot, that many in the software industry worry about the large number of patents coming out of Microsoft and IBM. I can’t emphasize enough Paul’s statement regarding the main purpose of those patents. Large companies are too busy doing business to worry about who might be infringing on a patent in their portfolio. Product launches and software development activities related to version.next are primarily about getting a new compelling product out the door and maintaining a defensive mode in regards IP and patent infringement.

“When you read of big companies filing patent suits against smaller ones, it's usually a big company on the way down, grasping at straws.”

Think of CompuServ, Sun, CA, Unisys, maybe even most notoriously Caldera. I know, Caldera only made it to an IPO and that was only marginally successful so they aren’t really a large company. (I only add them into the discussion because I had an employment offer from them back in 1995 so I took a personal interest in following their activities.)

“If a startup wants to grow into a big company, they should apply for patents to build up the patent portfolio they'll need to maintain an armed truce with other big companies. If they want to get bought, they should apply for patents because patents are part of the mating dance with acquirers.”

I think this one is self-explanatory but very important. A big company is looking to buy you for one of several reasons. 1. You have customers loyal to your product they’d like to add to their customer base. 2. You have key patents on a technology they are interested in and are looking to add to their stockpile. 3. They are looking to expand into a new market and don’t have the time to develop their own product.

When it comes to patents, they are a necessary evil. The dollar value of any given patent is actually quite low. I’ve heard the number value of $20,000 thrown around quite a bit. So if you think you can become rich from initiating a patent action, think again.

Think of patents more like an ice axe to the mountain climber, its great for helping you up and down the mountain. No, you don’t really need one if you’re not afraid of losing your life. And, they provide more than decent protection against hungry or scared wildlife.