Download this Paper Open PDF in Browser

Patent Strategies of Technology Startups: An Empirical Study

63 Pages Posted: 26 May 2015  

Celia Lerman

Universidad Torcuato Di Tella

Date Written: May 25, 2015

Abstract

How does a patent strategy affect a tech startup company’s growth? This is a fundamental question for technology entrepreneurs, investors, lawyers and the innovation system as a whole. In this study, I shed light on this issue by conducting an empirical analysis of the patenting strategies of technology startups, examining the relationship between a company’s patent applications and different events over the company’s life: rounds of investment received, company acquisition and closure. I provide the first comprehensive cross-industry analysis of this question, by analyzing the patent portfolios of United States startups listed in CrunchBase, a crowd-sourced registry of tech companies used by the startup industry. By looking into these companies’ public patent applications from the United States Patent and Trademark Office (USPTO) database between 2008 and 2012, I examine the patenting patterns of startups as they progress through funding rounds.

Through a quantitative analysis, I find that companies based in California tend to patent more than in other states, and that companies that are venture-backed patent more than those who are not. I also unveil that most start-ups that patent file their first application before even receiving any reported funding. Moreover, I find that there is a significant positive relationship between patent protection, and receiving investment and being acquired. I further find that the number of patents (and not merely the fact that a company has patents or not) contributes to higher total funding. I finally observe that patenting early is also associated to higher funding, and that early may be more important for start-ups than what some views in venture capital may predict. I also conclude that while more patents are associated with higher funding, patents account for a relevant but small portion of a company’s success.

The study provides novel insights on startup patenting strategies. It lays empirical groundwork on key circumstances under which patents can contribute to a startup’s growth, to provide important guidance to the legal and entrepreneurial communities.

Keywords: patents, startups, empirical, innovation, patent strategy

JEL Classification: O31, O32, O34

Suggested Citation

Lerman, Celia, Patent Strategies of Technology Startups: An Empirical Study (May 25, 2015). Available at SSRN: https://ssrn.com/abstract=2610433 or http://dx.doi.org/10.2139/ssrn.2610433

Celia Lerman (Contact Author)

Universidad Torcuato Di Tella ( email )

Minones 2159
C1428ATG Buenos Aires, 1428
Argentina

Paper statistics

Downloads
846
Rank
22,256
Abstract Views
4,981