Sunday, February 24, 2013

Should Small Inventors Pursue Patents?

I recently attended a talk by Shane Matthews, an engineer who worked on the Super Soaker and Nerf Guns, and who has gobs of patents and products out there selling. He asked, "If you only have $10-20k left, should you get a patent, or should you invest that in marketing?" The answer was marketing, since getting a patent can easily cost that much.

I asked him how many of his products have patents, and he said about 2/3 don't have any patents. He said lots of times patents don't make sense, like for many types of toys, and for things that are only going to be around for a few years. By the time your competitors copy you, the fad is over.

Ok, so as a small-time inventor, I don't need a patent. Great!

Shane went on to say that the only reason he's able to license products to manufacturers without patents, is because he has a long history with those manufacturers. He said it's extremely unlikely that any manufacturer will even talk to you if you don't have a patent. And the Super Soaker and Nerf Guns? Well there are 30 patents on some of the Super Soakers.

For someone looking to license their technology, patents look like a necessary evil.

What about someone wanting to form a company around a new product? In this case, I believe the smaller the company / investment, the less value patents provide.

Let's say you have a legitimately new idea, get a solid patent on it, and run into a big company that sues you because... well, because they can. Even if you win the court case, it could easily cost you over $500k just to defend it, according to a survey from 2011. And that's assuming you can actually win the case. If your product involves any software, how likely is it that you're not infringing on some patent somewhere?

From a defense perspective, I think your only option is to run faster than the competition, and build a customer community / brand around your product. That's something that can't simply be copied or sued away from you.

However, for a small company, even though a patent won't help defend your product, it can still be valuable in terms of making your company more desirable for acquisition or further investment. A big company buying your small company may actually have the funds to defend that patent. And investors just like patents.

In conclusion, for small investments (< $1M?), a patent probably won't do the one thing it was designed to do (give you a monopoly on the market), but it could definitely help you get licensed, invested in, or bought. Just make sure that $10-$20k wouldn't better be spent on seeing if anyone actually likes your idea!

1 comment:

  1. There is one point that is missing in this article, which might nevertheless be worth some consideration.

    If you open a company based on a technological idea, you might be sued by a bigger company holding patents that are somehow related to your idea. Typically, if you have patented your own products, you might be able to make cross-licence agreements with the bigger company and settle the case. If you do not have any patents, the bigger company does not have much to loose and will try to stop your business.


comments are moderated, I'll review them as soon as possible!