6 January, 2016 - 10:36 By Tony Quested

Patent portfolios: Tin foil or armour?

We live in cynical times so I feel no need to sanitise my view of what should be the logical business stance regarding the value of patents to both startups and more mature companies.

As we emerge blinking into the dawn of a new year it occurs that patents are a little like the wrapping paper and ribbons that titivated the Christmas gifts. They add to the allure but don’t advance or diminish the value of the contents.

Recent research from the University of Cambridge exploded the myth that VCs improve the patenting performance of companies they invest in.
VCs want investee businesses to focus on commercialising existing IP rather than foraging for new innovation, a Judge Business School report discovered.

Over more than 25 years now, judges in the Business Weekly Awards – many of them heavy-hitting investors in their own right – have often sat mouths agape as CEOs have endeavoured to justify why they believed a huge patent portfolio was worth more to the business than making money!

As even the most flinty patent attorney will testify, patents alone are tin foil rather than armour. Protecting a patent portfolio is costly and the cost of defending them when a powerful predator starts sniffing around your IP can send a young, naive business hurtling into a brick wall with fatal consequences.

NXT, originally Mission, was arguably sunk by the weight of its patent millstone; Nujura, arguably the Cambridge cluster’s oldest technology startup, was swiftly taken out when it came up against Qualcomm in a patent arm-wrestling contest.

A number of companies are commercialising technology, the patents on which could not save Pursuit Dynamics as a stand-alone entity. There are many other examples locally where apparent patent power has proved as illusory as the Emperor’s New Clothes at the merest hint of an infringement dispute.

Some patent disputes in the States have cost the prey $1m just to start a defence and up to $10m to complete the law suit process. Even the strongest patents can finish up as spent shells in a losing and largely pointless battle. Best leave the legal tugs-of-war to the Apples and Samsungs of this world.

As hundreds of entrepreneurs have discovered over the years, you can have a perfectly valid patent but still be beaten in a court that doesn’t know a scintilla about science or a tad about technology.

I have often seen quoted online a patent litigation study that PwC produced in 2012 that showed patent holders had a c40 per cent chance of losing their case.

The most vulnerable species washing around in the various new waves of technology are university spinouts and corporate startups – minnows surrounded by sharks and piranhas.

The giants of the science & technology world, with hungry shareholders to keep happy and boardroom fat cats to feed, are on constant alert for the latest innovation in synergistic fields.

Your bright idea in the lab might be their next big meal ticket before you can earn a penny; no amount of patent protection will save you from a determined and cash-rich hunter.

It is therefore pragmatic, not cynical, to suggest that the wisest move for a startup hatching something hot is to begin an exit strategy around the same time they are filing a patent!

That view has often been expressed by financiers who know the realities of commercialising innovation but has rarely been more relevant than it is today – especially in Cambridge, which is now awash with world-leading Science & Technology market leaders.

We reported near the end of last year the secrecy Apple was deploying at its new Hills Road, Cambridge hub as it prepared to integrate speech AI specialist VocalIQ – windows frosted up to the second floor so no-one could see in or out. No external branding.

News now reaches us that another international acquirer of Cambridge technology is even blocking out certain areas within its Science Park offices so some workers cannot see what so-called colleagues are doing for fear of idle tongues leaking secrets externally.

To protect ideas and the interests of initial investors it has clearly never been so paramount for innovators to get product into the hands of customers early and scale rapido. Market validation and sales trump vanity and patents every time.

If you cannot scale from birth then – before you try to fly too high – it may be prudent to remember where you hid the parachute. Patently obvious, one might say.
 

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