Patents As Assets and Tech Startup Funding

Patents As Assets and Tech Startup Funding

At VoxEu, Bronwyn Hall outlines the case for why the transferability of patents could be a boon for start-ups:

Patents also create a securable asset in an environment where few assets are available, potentially unlocking external finance. Given the high probability of startup failure, however, the patent must have salvage value – i.e. when there is a secondary market for it.

There is evidence in the literature that patenting does increase venture capital (VC) finance for firms with patents.

On the other hand, Hall notes, only a relatively small number of startups, even VC-backed ones, engage in patenting their innovations, mostly due to the “cost and [lack of] desire to keep an innovation secret.” Whether patents are a net benefit overall, given the costs they impose as well as the benefits they confer, remains unclear:

The evidence on the overall impact of the patent system on startups, or indeed on innovation as a whole, is inconclusive. Patents seem to help some startups secure finance, but at a cost that discourages many firms from using them. The benefits to startups of the secondary market for patent assets are even more difficult to discern.

Further research may make the case for patents as a tool for attracting VC for startups clearer, but even if this turns out to be the case, preserving the IP status quo is not necessary to achieve this particular benefit.

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By |2018-07-23T13:34:40-07:00July 23rd, 2018|Blog, Intellectual Property|