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The link to the study in TFA is broken, but here are some more relevant studies: 1. Study of startup patenting in various industries indicating entrepreneurs s

The link to the study in TFA is broken, but here are some more relevant studies: 1. Study of startup patenting in various industries indicating entrepreneurs say patents help getting financing: http://www.law.berkeley.edu/9135.htm http://www.law.berkeley.edu/9135.htm (There was controversy around this study, where VCs with an anti patent stance, such as Brad Feld, publicly disagreed with the analysis. As TFA shows, they are probably in the minority.) 2. Study showing startups with patents more likely to get late stage financing and/or have a successful exit: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=802806 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=802806 3. Study (apparently -- it's paywalled unfortunately) showing startups with "stronger than typical" IP more likely to succeed: http://m.iam-magazine.com/blog/detail.aspx?g=ae1d78db-9c5e-41aa-a4f9-161c7de6c9fb http://m.iam-magazine.com/blog/detail.aspx?g=ae1d78db-9c5e-4... (Note that the study was done by MIT Sloan and IPVision, an IP consulting firm, so something to keep in mind.) Keep in mind that all studies must necessarily make some assumptions to make sense of their data, and some assumptions may be more valid than others. Also, different data sets and different methodologies give different results. For instance, the 2007 paper in [2] found much lower patenting rates in software than did the 2008 survey in [1]. Yet the patent possession/success correlation is hard to doubt. In addition to [2] and [3], there are other papers, such as by Rosemary Zeidonis, that also show a robust correlation between patenting and eventual success in high tech industries. Also, there's a working paper by a Pepperdine professor showing firms with patents four times more likely to succeed. I linked [2] particularly because it has a greater focus on the software industry. I do agree that Twitter's strength is in network effects, and so is less likely to be affected by issues affecting other startups. Just trying to show some numbers to explain why (some) investors see the lack of patents as worrying. However, the argument that the Innovators's Patent Agreement will attract the "best and brightest" is a false premise, handily disproved by Google and Facebook, just to pick two. It will attract a certain type of talent, maybe something Twitter is particularly looking for, but "best and brightest" is not necessarily it.

michaelt 13y ago
Yet the patent possession/success correlation is hard to doubt. How do you tell apart correlation and causality in studies like this? I mean, it seems to me patents are at their most useful when you have to make large upfront research investments, which is mandatory to get your foot in the door in some parts of the tech industry (IC fabrication) - but in other parts of the tech industry people would prefer to test the market with an MVP, and may be able to avoid a large upfront investment at all, so investors would tolerate higher risks of failure (iphone apps). So it's believable there could be confounding factors - how do studies control for them?
- throwawaykf 13y ago
  As far as I recall, most of these studies, especially [2], mostly just present their findings of a correlation, along with the data and any variables that may be relevant, without trying to prove causation. They may posit some tentative theories in their analyses, but are careful not to make any conclusions on those. However, your observation about many software startups would prefer to release an MVP and iterate rather than invest a lot of upfront work and patent is also borne out by data in [1] and in other studies, such as some of Bessen and Maskin's papers. I think Malandrew's sibling comment is also a very salient point, and combined with my hunch that a vast majority of startups (or, heck, software companies in general) are not doing particularly technically innovative work, it goes a long way in explaining the data in those papers.
malandrew 13y ago
Also, there's a working paper by a Pepperdine professor showing firms with patents four times more likely to succeed. I linked [2] particularly because it has a greater focus on the software industry. I'd also add that it's possible that there is a high correlation between having patents and working on a business that is well ahead of the curve relative to industry. When you create a photosharing service based on off-the-shelf parts like Rails or Angular, you are less likely to do any patentable work. It's also less likely that you have a defensible business model if successful, since anyone else out there can pick up the same off the shelf parts or analogues and build the same product. With patentable work, the idea may be out there, but the implementation isn't necessarily out there as well and you often don't have enough information in a patent filing for someone skilled in the start of the art to implement a comparable clean room implementation without spending a long time experimenting to reach parity.

michaelt 13y ago

Yet the patent possession/success correlation is hard to doubt. How do you tell apart correlation and causality in studies like this? I mean, it seems to me patents are at their most useful when you have to make large upfront research investments, which is mandatory to get your foot in the door in some parts of the tech industry (IC fabrication) - but in other parts of the tech industry people would prefer to test the market with an MVP, and may be able to avoid a large upfront investment at all, so investors would tolerate higher risks of failure (iphone apps). So it's believable there could be confounding factors - how do studies control for them?

throwawaykf 13y ago
As far as I recall, most of these studies, especially [2], mostly just present their findings of a correlation, along with the data and any variables that may be relevant, without trying to prove causation. They may posit some tentative theories in their analyses, but are careful not to make any conclusions on those. However, your observation about many software startups would prefer to release an MVP and iterate rather than invest a lot of upfront work and patent is also borne out by data in [1] and in other studies, such as some of Bessen and Maskin's papers. I think Malandrew's sibling comment is also a very salient point, and combined with my hunch that a vast majority of startups (or, heck, software companies in general) are not doing particularly technically innovative work, it goes a long way in explaining the data in those papers.

malandrew 13y ago

Also, there's a working paper by a Pepperdine professor showing firms with patents four times more likely to succeed. I linked [2] particularly because it has a greater focus on the software industry. I'd also add that it's possible that there is a high correlation between having patents and working on a business that is well ahead of the curve relative to industry. When you create a photosharing service based on off-the-shelf parts like Rails or Angular, you are less likely to do any patentable work. It's also less likely that you have a defensible business model if successful, since anyone else out there can pick up the same off the shelf parts or analogues and build the same product. With patentable work, the idea may be out there, but the implementation isn't necessarily out there as well and you often don't have enough information in a patent filing for someone skilled in the start of the art to implement a comparable clean room implementation without spending a long time experimenting to reach parity.