Communications - November 2010

Vviewpoints
DOI: 10.1145/1839676.1839687
Legally Speaking
Why Do Software Startups
Patent (or Not)?

TWo-ThIrDS oF The approxi- mately 700 software entre- preneurs who participated in the 2008 Berkeley Patent Survey report that they neither have nor are seeking patents for innovations embodied in their products and services. These entrepreneurs rate patents as the least important mechanism among seven options for attaining competitive advantage. Even software startups that hold patents regard them as providing only a slight incentive to innovate.

These are three of the most striking findings from a recently published article, “High Technology Entrepreneurs and the Patent System: Results of the 2008 Berkeley Patent Survey.” 1 After providing some background about the survey, I will discuss some key findings about how software startup firms use and are affected by the patent system.

While the three findings highlighted above might seem to support a software patent abolitionist position, it is significant that one-third of the software entrepreneur respondents reported having or seeking patents, and that they perceive patents to be important to persons or firms from whom they hope to obtain financing.

no more than 10 years old before the survey was conducted. We drew our sample from a general population of high-tech firms registered with Dun & Bradstreet (D&B) and from the Ven-tureXpert (VX) database that has a rich data set on venture-backed startups. (Just over 500 of the survey software respondents were D&B firms; just under 200 respondents were VX firms.)

Eighty percent of the software re-
spondents were either the CEOs or
CTOs of their firms, and most had
experience in previous startups. The
average software firm had 58 employ-
ees, half of whom were engineers. Be-
tween 10%–15% of the software startup
respondents among the D&B respon-
dents were venture-backed firms.
Among the software respondents, only
2% had experienced an initial public
offering (IPO), while 9% had been ac-
quired by another firm.

measures of capturing “competitive advantage” from inventions.

how important or unimportant is each of the following in your company’s ability to capture competitive advantage from its technology inventions?

software
medical Devices
Biotechnology
first-mover
advantage
secrecy
patents
copyright

some Background on the survey More than 1,300 high-technology entrepreneurs in the software, biotechnology, medical devices, and computer hardware fields completed the Berkeley Patent Survey. All of these firms were