This article is by David Pridham and Brad Sheafe, the chief executive officer and chief intellectual property officer, respectively, of the patent advisory and optimization firm Dominion Harbor Group.
The patent system has gotten a pretty poor reputation of late, especially among startup businesses that have been targeted by patent trolls hoping to extort quick settlements. But entrepreneurs would be well-served to remember that even if the occasional troll can game the system to harm a vulnerable young company, patents themselves are often quite valuable—if not critical—to a startup’s success.
Here are the top 10 reasons why your startup needs patents.
1. Patents facilitate venture capital investment. 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% of venture-backed startups reported that patents had been vital for them in securing investment. While 40% of all startups held patents, 80% of those receiving venture capital investment owned patents.