Intellectual Property (IP) in all companies is underutilized, but especially in startups. While a majority of entrepreneurs, 67% according to Berkeley, acknowledge the importance of IP in securing VC funding deals, as of 2012, only 40% of startups actually had patented tech. It is likely that number is much lower today, because most startups launch and fail much quicker.
To most, patents are a black box. As a result, most companies do not file or organize their IP. A vast majority of innovators fail to take advantage of the opportunities that IP presents. Due to costs of getting a patent and the inefficiencies in the IP market, there is little incentive to consider patenting early on, which is the most important time in a startup’s lifecycle. The secret to overcoming these hurdles and optimizing commercialization lies in establishing collaborative projects with corporates as early as possible.
Let us consider how collaboration with innovative deep tech startups could help tackle inefficiencies in the current IP commercialization model.
One of the major bottlenecks hampering commercialization is an imbalance between resources and innovative capacity. The average large business has the resources required to file patent applications and commercialize technology. But, they are often too busy with multiple product lines to dedicate time to actual innovation. When it comes down to it, large enterprises move very slowly, and it is as much a political process as it is bureaucratic.
Startups, on the other hand, are overflowing with creativity. They innovate, optimize, build and fail, and build on top of that very quickly, creating tons of IP in the process. However, due to significant resource limitations and lack of basic patenting knowledge, their ability to capture all that IP and commercialize it successfully is inhibited. Due to lack of funding and market validation, most of their life changing ideas and products never quite reach their full potential.
Through collaborative deals and joint ventures, startups can be better equipped to bridge the gap and address the inefficiencies by building strong patent pending portfolios and garnering the attention of corporates early.
Another advantage that large organizations have over startups is their ability to handle litigation pitfalls successfully. As it stands, legacy companies and patent trolls often target small, innovative companies with frivolous lawsuits. Due to high litigation costs and the risk of injunction, some small companies opt to pay out of court settlement fees just to close the case, but ends up costing them their entire business.
Ultimately startups do not have the resources to fight an infringement lawsuit. On the other hand, larger organizations have the means and the personnel to stave off an attack. Startups might want to seek partnerships early to reduce the litigation risk, and which again underscores the value of joint ventures and collaboration with established players.
Unable to reach product market fit, most startups have a short lifecycle before they fail. But, on average it takes longer than that to get through the patent approval process. That means most startups will die before a single patent ever issues. It might be good business to collaborate and partner with a larger, more established player to increase the likelihood of surviving the tough early years. Extending a startup’s lifecycle through a collaborative agreement will thus enable them to make the most of commercialization opportunities with a lower risk of premature business failure.
Another major weak point in commercialization has to do with patent quality. According to the WIPO, good patents should be able to withstand litigation and provide an opportunity for revenue generation. Unfortunately, the IP industry has been flooded with low quality patents which cannot live up to either of these criteria.
Addressing patent quality issues would be easier with a partner who understands its market. To begin with, many startups make the mistake of filing patents solely as a defensive mechanism. In such cases, they do not pay attention to quality but rather focus on plugging defensive holes.
A good business strategy should focus on ROI. Consequently, smart CEOs do not rush to file patents and write claims for the sake of filing a non-provisional patent application. Instead, they take advantage of the Provisional Patent Application (PPA) process, a much simpler but highly advantageous process as Seventh.ai reveals. A founder could get to patent pending status in one day and get a 12-month period during which they carry out thorough research in stealth before filing a single non-provisional patent.
Collaborative efforts clearly offer a host of benefits in as far as commercialization of IP is concerned. Under joint venture agreements, startups enjoy better access to resources and an opportunity to focus on making breakthroughs. This enhances IP quality, reduces litigation risks and offers CEOs and their products a fair chance of finding product market fit. This new type of collaborative approach can help reduce some of the obstacles that currently hamper IP commercialization.