High Technology Entrepreneurs and the Patent System

Pamela Samuelson is the Richard M. Sherman ‘74 Distinguished Professor of Law and Information at the University of California at Berkeley.

Researchers affiliated with the Berkeley Center for Law & Technology–Rob Merges and Pam Samuelson of Berkeley Law School, Ted Sichelman of University of San Diego Law School, and Stu Graham of the Georgia Institute of Technology–have just published a report on the results of their survey of more than 1300 high tech startup companies on the uses these firms make of patents and how patents affect them.  “High Technology Entrepreneurs and the Patent System:  Results of the 2008 Berkeley Patent Survey” can be found in 24 Berkeley Tech. L.J. 1255 (2010).  It can also be found at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1429049.

One major finding of the report is that high technology entrepreneurs are patenting at higher rates than previous studies have estimated.  Firms are twice as likely to seek patents if they are venture-backed than if they are not.  Aggregating the results, first mover advantage is the most important basis for competitive advantage for high tech entrepreneurs in the software, biotech, medical devices, and computer hardware fields.  Separated out, though, biotech firms rate patents as most important, with first mover advantage being a close second. Software firms, by contrast, rate patents as the least important of the seven strategies for attaining competitive advantage about which the survey inquired.  For software firms, complementary assets, copyrights, trademarks, secrecy, and difficulty of reverse engineering were perceived more important than patents.

The most intriguing and surprising finding of this study is that entrepreneurs rate patents as providing only weak to moderate incentives to invest in innovation.  Yet, many firms are obtaining patents, in part because venture capitalists and other prospective funders think patents are important signals of the firms’  prospects for success.