Patenting by Entrepreneurs: An Empirical Study

Abstract

The 2008 Berkeley Patent Survey is the first comprehensive investigation in the United States of patenting by entrepreneurs. In this Article, we use the survey results to explain why entrepreneurs and startup companies patent (and choose not to do so). We first briefly explore the dominant theories in the literature of why entrepreneurs file for patents and why they forgo patenting. Next, we describe the previous - and very limited - empirical data on the topic. Finally, we examine the results of the 2008 Berkeley Patent Survey. In addition to confirming the importance of patents to the biotechnology and medical device industries, we also find that patents appear to play a more important role in preventing competition for software entrepreneurs than previously believed. Additionally, startup firms in all industries--but especially in the biotechnology and medical-device sectors - use patents for "strategic" reasons, such as gaining leverage in cross-licensing negotiations, as well as "signaling" reasons, such as improving their chances of securing investment. We also find that a large share of entrepreneurs forgo patenting their inventions because the cost of doing so is too high. We conclude by briefly discussing potential policy implications of our findings.

Keywords: Entrepreneurs, patents, startups, early-stage companies, venture capital