Should Web startups patent their technology?

It is part of the startup mantra, that at page 5 or thereabouts in the startup pitch the VC wants to know what patents they have, and this is seen as the certification of quality for the bona fide startup.

However, this could be a fairly non-sensical strategy in today's world. A conversation I had yesterday at the Wealth of Networks conference yesterday was very though provoking:

Dr Ludmila Striukova of UCL noted that most IP law was designed for large organisations and that in today's world, in effect, a patent today guarantees nothing except the option to argue in court for your intellectual property rights, and for companies with limited resources, that option is nearly valueless.

Also, did you know that most patents in the US and Europe are published about 18 months after filing, yet granted on average only 3-4 years after filing? Add to that three other things about patents:

(i) When you register a patent, at some point it is published for all to see. There are quite a few large corporates (whose own R&D budgets have been repurposed) and troll companies mining new patents to see if they can find gold. This is a lot easier than it once was, as patents are all online. Broadsight's own Paul Lancefield has built a patent search and comparison engine for example.

(ii) Although you can get insurance to pay for defence, or engage pay-if-you-win lawyers, by that time it is too late. For a startup, the impact of merely having a pending patent infringement lawsuit can be disastrous, as the risk of action alone will be enough to deter many investors.

(iii) Not all patent mining is done in countries where you could actually go to law anyway.

Given that filing and maintaining patents are non trivial costs for a small companies, this made me wonder if this was still the best strategy.

The whole patent credo comes from an earlier world, where it was "hard science", not easier to replicate software or business processes, that was the New New Thing being patented. In this pre-internet world the transaction costs of troll-searching patents in a space was also far harder.

To be sure, the trolling problem is worse in the US than in Europe (though it seems the pendulum is swinging back) in the US, but its an interesting thought for a startup not to bother to patent.

So what to do? VC's will still want some form of validation, and though traction may be a far better form today, it is still necessary to show some form of business viability. The problem with getting a legal opinion (apart from the cost) is that it is no great guarantee, as infringement decisions when challenged can be very unpredictable.

One of the benefits of a patent search capability is you can see whether there would be any patents that conflict with yours, and see if there is a valid gap, without you actually having to file patent or paying for a legal opinion. At Broadsight for example, we can see what patents lie in a particular space.

Paul's view is that, at present, startups should still patent because:

- We don't think not patenting is the alternative. Indeed that amounts to simply giving-up before the might of the
mega-corporate. Patents confer a legal monopoly right and though they are expensive they provide the only means for the small guy, start-up or independent programmer with a really good idea to create space such that big technology companies can't stomp all over them.

- Software patents have got a bad name simply because for years most companies thought you couldn't file for them, which in turn has meant there was a huge fertile ground available where those who could afford to do so could (and did) "backfill" filing for inventions that weren't. The real danger now, I think, is this indignation is driving an anti-patent backlash which is playing right into the hands of the corporate leviathan. The fact is patents won't be abolished, but large technology companies are using the anti-patent feeling very effectively to lobby for changes that will benefit them, whilst massively undermining the small-guy and the start-up.

- The open source advocate driven backlash against software patents is playing hugely into the hands of the corporate leviathan and you can be sure it will be the small-guy and the start-up that suffers.

- Many of the the so called "Patent Trolls" are in fact companies which, through a licensing arrangement, aggregate and protect patents owned by the likes of you and I and independent programmers. Defence costs are a fact of patent ownership, and these so called "Trolls" actually provide a legitimate and useful service much like the services which provide for the refactoring of debt for small businesses. What is more, the very presence of these companies demonstrates patent ownership is viable for the small-guy. Its more the large corporations interest to vilify them.

Food for thought indeed - in essence, patents are not ideal for small companies, but its the best thing they have, and not all trolls are your enemy.