The value of a patent to a startup

For Fortune 500 companies, patents can be offensive and defensive weapons generating billions of dollars worth of royalty and licensing revenues.

…if someone at Apple can dream it up, then we should apply for a patent, because even if we never build it, it’s a defensive tool,” Nancy R. Heinen, Apple’s former general counsel

The Patent, as a Sword:

But startups shouldn’t approach patents the same way large companies do. Instead, founders should view patents as downside protection - an asset to be valued during a fire-sale of the business.

For startups, patents are specious barriers-to-entry. Unlike large corporate patent owners who wield patents in defense of their businesses, founders can’t afford to enforce patents. Startups simply don’t have the legal budgets to bankroll lengthy legal processes.

Vlingo fought Nuance for 3 years in court to defend their patents - only to win a Pyrrhic victory. The legal battle exhausted the company’s assets and Vlingo sold to Nuance a short while later for the value of the patents.

File your patent, mention it on a pitch deck slide, and then tuck it in your back pocket as a trump card to play when your startup has amassed the legal war chest to enforce it.

Published 2012-10-11 in Startups  Best Practices 


I'm a partner at Redpoint. I invest in Series A and B SaaS companies. I write daily, data-driven blog posts about key questions facing startups. I co-authored the book, Winning with Data. Join more than 18,000 others receiving these blog posts by email.


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