7 ms·

I realize this won't be popular with this crowd. One big reason is the campaign against patents in general, and against software and e-commerce patents in spec

I realize this won't be popular with this crowd. One big reason is the campaign against patents in general, and against software and e-commerce patents in specific. Why would an investor put down money for an idea for a new website where FB Google Amazon Apple MS will simply copy the idea and use their economy of scale to remove even the hint of success?

dmritard96 9y ago
I'm not buying that. The reality is early stage companies dont bother with patents as mich because of money and time constraints. Really well funded compa oes sure, but the reality is patents are a tool for the big guys, if you have to do battle with google, your startup is probably screwed either way.
- king07828 9y ago
  This is exactly the problem. Patents used to be a tool that little guys could use against the big guys. Like when Google started with a patent on its search algorithm that prevented Yahoo from copying its idea. Interestingly, this was also a form of wealth redistribution that forced large companies to give money to smaller companies with good ideas. If you assume that the patent system is being weakened, it is interesting how it aligns with a reduction in seed funding while at the same time seeing massive market valuations for already enormous tech companies.
- socialentp 9y ago
  Yes, but this ignores the fact that those patents are transferred to an acquirer upon the sale of your startup. Yes, the patent is largely useless to your startup. However, if you've proven the market, a patent could be an attractive perk to acquire your startup (rather than just copying and crushing it) since they can use that patent to keep other big players out.
starfishjenga 9y ago
Do you have any evidence for this hypothesis?
taylorwc 9y ago
As an early stage investor, I don't find that logic compelling. What makes a company an exciting investment isn't that they are doing something that is protected via intellectual property from $BIGCO. It's that they have a compelling team and a unique set of advantages (maybe product, niche market, timing). Even with patent protection, $BIGCO can still win that battle. Litigating and protecting intellectual property in that context will kill the startup anyway.
- king07828 9y ago
  I don't find that logic compelling either. If $NEWCO_A and $NEWCO_B are effectively equivalent (team, advantages, etc.), but $NEWCO_A has a provisional patent application that protects the idea and $NEWCO_B does not, then the value of $NEWCO_A should be greater than the value of $NEWCO_B. Thus, patents (i) should add value and (ii) may make an average investor more likely to invest. If the value of the patents of small companies is being reduced because patents cost more [1] and are harder to enforce [2], then $NEWCO_A will have less of an advantage and won't receive as much funding as it would have otherwise. Thus, there may be fewer investors willing to invest because of the decrease in the value of patents of small companies. [1] http://www.ipwatchdog.com/2017/07/16/real-staggering-cost-getting-patent-ptab/id=85639/ http://www.ipwatchdog.com/2017/07/16/real-staggering-cost-ge... [2] http://www.ipwatchdog.com/2017/11/16/ipr-petitions-virnetx-patent-apple-statute-of-limitations/id=90233/ http://www.ipwatchdog.com/2017/11/16/ipr-petitions-virnetx-p...
jaredklewis 9y ago
Not sure what “campaign” you are referring to, but patents rights are still strong and there is nothing to stop someone from applying for them. Filing patent applications isn’t all that cheap and can easily cost 10k per application in legal fees. Not sure that is the best use of resources for a pre-series A company. These early stage startups usually die off from not getting customers/users. I imagine seed investors are more worried about their companies not getting traction. By the time they have enough users that facebook and google start to notice, they can raise a series A and file for patents. Also, let’s say Facebook does copy a seed startups patent protected product. What are the company going to do, sue them? Seed funding might be able to pay lawyers for like a week. Patents are a big company’s game. TLDR: no, patents have absolutely nothing to do with the decrease in seed funding.
- king07828 9y ago
  I expect you are biased against patents and had your TLDR conclusion in mind before writing your post. While patents may not be the only thing affecting the decrease in seed funding, saying that "patents have absolutely nothing to do with the decrease in seed funding" seems a little extreme. The "campaign" includes Supreme Court opinions [1], Inter Partes Reviews [2], the Patent Trial and Appeal Board [3], and biased government actions that favor, e.g., Google over smaller companies and inventors [4]. "patent rights are still strong ..." Yes, anyone can file a patent, but the costs for enforcement are higher and higher [5], while the probability of successful enforcement is lower and lower [6]. "What [is] the company going to do, sue them?" Yes. If patent rights were "strong" like when BlackBerry got sued and settled for $612M [7], then investors would be lining up to fund the company and its litigation. [1] https://scholar.google.com/scholar_case?case=7784134755284986738 https://scholar.google.com/scholar_case?case=778413475528498... [2] http://www.ipwatchdog.com/2017/08/08/problem-inter-partes-review-ipr/id=86287/ http://www.ipwatchdog.com/2017/08/08/problem-inter-partes-re... [3] http://www.ipwatchdog.com/2017/07/22/ptab-number-one-enemy-inventors/id=85659/ http://www.ipwatchdog.com/2017/07/22/ptab-number-one-enemy-i... [4] http://www.ipwatchdog.com/2017/11/13/ptab-targeted-advertising-patents-google-ad-revenue/id=90076/ http://www.ipwatchdog.com/2017/11/13/ptab-targeted-advertisi... [5] http://www.ipwatchdog.com/2017/07/16/real-staggering-cost-getting-patent-ptab/id=85639/ http://www.ipwatchdog.com/2017/07/16/real-staggering-cost-ge... [6] http://www.ipwatchdog.com/2017/11/16/ipr-petitions-virnetx-patent-apple-statute-of-limitations/id=90233/ http://www.ipwatchdog.com/2017/11/16/ipr-petitions-virnetx-p... [7] http://money.cnn.com/2006/03/03/technology/rimm_ntp/ http://money.cnn.com/2006/03/03/technology/rimm_ntp/

dmritard96 9y ago

I'm not buying that. The reality is early stage companies dont bother with patents as mich because of money and time constraints. Really well funded compa oes sure, but the reality is patents are a tool for the big guys, if you have to do battle with google, your startup is probably screwed either way.

king07828 9y ago
This is exactly the problem. Patents used to be a tool that little guys could use against the big guys. Like when Google started with a patent on its search algorithm that prevented Yahoo from copying its idea. Interestingly, this was also a form of wealth redistribution that forced large companies to give money to smaller companies with good ideas. If you assume that the patent system is being weakened, it is interesting how it aligns with a reduction in seed funding while at the same time seeing massive market valuations for already enormous tech companies.
socialentp 9y ago
Yes, but this ignores the fact that those patents are transferred to an acquirer upon the sale of your startup. Yes, the patent is largely useless to your startup. However, if you've proven the market, a patent could be an attractive perk to acquire your startup (rather than just copying and crushing it) since they can use that patent to keep other big players out.

starfishjenga 9y ago

Do you have any evidence for this hypothesis?

taylorwc 9y ago

As an early stage investor, I don't find that logic compelling. What makes a company an exciting investment isn't that they are doing something that is protected via intellectual property from $BIGCO. It's that they have a compelling team and a unique set of advantages (maybe product, niche market, timing). Even with patent protection, $BIGCO can still win that battle. Litigating and protecting intellectual property in that context will kill the startup anyway.

king07828 9y ago
I don't find that logic compelling either. If $NEWCO_A and $NEWCO_B are effectively equivalent (team, advantages, etc.), but $NEWCO_A has a provisional patent application that protects the idea and $NEWCO_B does not, then the value of $NEWCO_A should be greater than the value of $NEWCO_B. Thus, patents (i) should add value and (ii) may make an average investor more likely to invest. If the value of the patents of small companies is being reduced because patents cost more [1] and are harder to enforce [2], then $NEWCO_A will have less of an advantage and won't receive as much funding as it would have otherwise. Thus, there may be fewer investors willing to invest because of the decrease in the value of patents of small companies. [1] http://www.ipwatchdog.com/2017/07/16/real-staggering-cost-getting-patent-ptab/id=85639/ http://www.ipwatchdog.com/2017/07/16/real-staggering-cost-ge... [2] http://www.ipwatchdog.com/2017/11/16/ipr-petitions-virnetx-patent-apple-statute-of-limitations/id=90233/ http://www.ipwatchdog.com/2017/11/16/ipr-petitions-virnetx-p...

jaredklewis 9y ago

Not sure what “campaign” you are referring to, but patents rights are still strong and there is nothing to stop someone from applying for them. Filing patent applications isn’t all that cheap and can easily cost 10k per application in legal fees. Not sure that is the best use of resources for a pre-series A company. These early stage startups usually die off from not getting customers/users. I imagine seed investors are more worried about their companies not getting traction. By the time they have enough users that facebook and google start to notice, they can raise a series A and file for patents. Also, let’s say Facebook does copy a seed startups patent protected product. What are the company going to do, sue them? Seed funding might be able to pay lawyers for like a week. Patents are a big company’s game. TLDR: no, patents have absolutely nothing to do with the decrease in seed funding.

king07828 9y ago
I expect you are biased against patents and had your TLDR conclusion in mind before writing your post. While patents may not be the only thing affecting the decrease in seed funding, saying that "patents have absolutely nothing to do with the decrease in seed funding" seems a little extreme. The "campaign" includes Supreme Court opinions [1], Inter Partes Reviews [2], the Patent Trial and Appeal Board [3], and biased government actions that favor, e.g., Google over smaller companies and inventors [4]. "patent rights are still strong ..." Yes, anyone can file a patent, but the costs for enforcement are higher and higher [5], while the probability of successful enforcement is lower and lower [6]. "What [is] the company going to do, sue them?" Yes. If patent rights were "strong" like when BlackBerry got sued and settled for $612M [7], then investors would be lining up to fund the company and its litigation. [1] https://scholar.google.com/scholar_case?case=7784134755284986738 https://scholar.google.com/scholar_case?case=778413475528498... [2] http://www.ipwatchdog.com/2017/08/08/problem-inter-partes-review-ipr/id=86287/ http://www.ipwatchdog.com/2017/08/08/problem-inter-partes-re... [3] http://www.ipwatchdog.com/2017/07/22/ptab-number-one-enemy-inventors/id=85659/ http://www.ipwatchdog.com/2017/07/22/ptab-number-one-enemy-i... [4] http://www.ipwatchdog.com/2017/11/13/ptab-targeted-advertising-patents-google-ad-revenue/id=90076/ http://www.ipwatchdog.com/2017/11/13/ptab-targeted-advertisi... [5] http://www.ipwatchdog.com/2017/07/16/real-staggering-cost-getting-patent-ptab/id=85639/ http://www.ipwatchdog.com/2017/07/16/real-staggering-cost-ge... [6] http://www.ipwatchdog.com/2017/11/16/ipr-petitions-virnetx-patent-apple-statute-of-limitations/id=90233/ http://www.ipwatchdog.com/2017/11/16/ipr-petitions-virnetx-p... [7] http://money.cnn.com/2006/03/03/technology/rimm_ntp/ http://money.cnn.com/2006/03/03/technology/rimm_ntp/