startups were utilizing the patent system, as well as to learn their reasons for choosing to avail themselves of the patent system—or not.

The basic economic principle underlying the patent system is that technology innovations are often expensive, time-consuming, and risky to develop, although once developed, these innovations are often inexpensive and easy to copy; in the absence of intellectual property rights (IPRs), innovative high-tech firms may have insufficient incentives to invest in innovation insofar as they cannot recoup their research and development (R&D) expenses and justify further investments in innovation because of cheap copies that undermine the firms’ recoupment strategy.

Although this economic principle applies to all companies, early-stage technology firms might, we conjectured, be more sensitive to IPRs than more mature firms. The former often lack various kinds of complementary assets (such as well-defined marketing channels and access to cheap credit) that the latter are more likely to enjoy. We decided it would be worthwhile to test this conjecture empirically. With generous funding from the Ewing Marion Kauff-man Foundation, three colleagues and I designed and carried out the survey and have begun analyzing the results.

Why startups Patent

The most important reasons for seeking patents, as reported by software executives who responded to the Berkeley Patent Survey, were these: to prevent competitors from copying the innovation ( 2. 3 on a 4 point scale, where 2 was moderately important), to enhance the firms’ reputation ( 2. 2), and to secure investment and improve the likelihood of an IPO ( 1. 96 and 1. 97 respectively).

The importance of patents to investors was also evident from survey data showing striking differences in the rate of patenting among the VX and the D&B software companies.

Three-quarters of the D&B firms had no patents and were not seeking them. Because the D&B firms are, we believe, fairly typical of the population of software startup firms in the U.S., their responses may well be representative of patenting rates among software start-ups generally. It is, in fact, possible

it is an article of
faith among many
iP lawyers that
patents provide
significant incentives
for firms to engage
in R&D and develop
new products.

that the overall rate of software startup patenting is lower than this given that patent-holders may have been more likely than non-patent-holders to take time to fill out a Berkeley Patent Survey.

In striking contrast to the D&B respondents, over two-thirds of the VX software startup respondents in the sample, all venture-backed, had or were seeking patents. We cannot say why these venture-backed firms were more likely to seek patents than other firms. Perhaps venture capitalists (VCs) are urging firms they fund to seek patents; or VCs may be choosing to fund the development of software technologies that VCs think are more amenable to patenting.

Interestingly, the rate of patenting did not vary by the age of the firm (that is, older firms did not patent more than younger firms).

Why forego Patenting?

The survey asked two questions about decisions to forego patenting: For the last innovation for which the firm chose not to seek a patent, what factors influenced this decision, and what was the most important factor in the decision?

The costs of obtaining and of enforcing patents emerged as the first and second most frequent explanation. Twenty-eight percent of the software startup executives reported that the costs of obtaining patents had been the most important factor in this decision, and 12% said that the costs of enforcing patents was the most important factor. (They reported that average cost of getting a software patent was just under $30,000.)

Calendar
of Events

November 17–19
asian Internet engineering
Conference,
Bangkok, Thailand,
Contact: Kanchanasut
Kanchana,
email: [e-mail]

November 17–19
advances in Computer
entertainment Technology
Conference,
Taipei, Taiwan,
Contact: Duh henry B.L.,
email: [e-mail]

November 22–23
Conference on Decision and
game Theory for Security,
Berlin, germany,
Contact: Tansu alpcan,
email: [e-mail]-
berlin.de

November 22–24
The 17th aCM Symposium on
Virtual reality Software and
Technology,
hong Kong,
Contact: george Baciu,
email: [e-mail].
edu.hk

December 1–3
9th International Conference
on Mobile and ubiquitous
Multimedia,
Limassol, Cyprus,
Contact: angelides Marios,
email: marios.angelides@
brunel.ac.uk

December 4–8
The 43rd annual Ieee/aCM
International Symposium on
Microarchitecture,
atlanta, ga,
Sponsored: SIgMICro,
Contact: Sudhakar
yalamanchili,
email: [e-mail]

December 5–8
Winter Simulation Conference,
Baltimore, Maryland,
Sponsored: SIgSIM ,
Contact: Joe hugan,
email: [e-mail]

December 12–13 Virtual reality Continuum and its applications in Industry, Seoul, republic of Korea, Sponsored: SIggraPh , Contact: hyunseung yang, email: [e-mail]