Should Entrepreneurs Avoid Examining Patents?

Question: Should entrepreneurs avoid patents, especially examining them, to avoid willful infringement and 3x damages down the road?

You should know that the word “patent” around this blog is a four letter word. Brad hates them and thinks most should be abolished. I’m not quite so forward-thinking, but I will tell you that I think the entire patent world is screwed up beyond belief. If anyone would like me to rant, leave a comment and I’ll post something later.

To answer your question, the answer is “yes” in my opinion. If you are simply hunting around to see what’s out there and you don’t currently have a company or idea, then there is probably no harm and no foul.

However, if you are engaged in a business, you should not be monitoring patents in your ecosystem for the very reasons that you bring up: knowingly infringing someone’s patent can lead to treble damages and attorney fees. Sometimes ignorance is bliss. If you happen to stumble upon something that you might infringe, you are in the unenviable position of what to do (answer: call your lawyer).

  • I’ll offer a few counter arguments. These obviously depend on how core the technology is to your business (I’m presuming that it is central).
    1. Investors, Shareholders & Acquirers. Investors not going to put money into your company if you face potential litigation, and you are unable to tell them if you infringe or not. This will definitely be covered in due dilligence. Likewise, you would be doing your shareholders a disservice by not understanding and evaluating your risk.
    2. Design around the patent. The patent world is screwed up. But for every overly broad patent there are many, many narrow patents. If you know and understand the patents in your field, you can frequently design around the narrow patents, making sure you don’t infringe.
    3. Triple dead. As a startup, if you fight a patent lawsuit all the way to the end and lose, chances are your company is sunk. It cost you a ton of money, you clearly haven’t been able to negotiate licensing, and you probably don’t have much outside investment. I would be surprised if 3x damages made the difference between dead and alive for your startup.

  • Ox J Schmitt

    Rant on Jason, rant on!

  • Doug

    The problem with this approach is that you look uninformed when VC’s ask you to explain the IP landscape when they are performing due diligence. Further, you need to get comfortable that you have freedom to operate, and the only way to do this is to review other’s patents.

  • Scott

    As a biotech entrepreneur, intellectual property is a major part of my day-to-day work. You need to monitor patents (and journal articles) in your ecosystem. Many strategic decisions are based on if you believe you can get protection for a certain idea. The only way to know that is if you have done your research and know what else has been patented. Also, just because something has been patented does not mean that you cannot use it. The development of therapeutics often requires licensing multiple patents from different institutions – both academic and commercial. Stacking provisions often can make licensing multiple patents economically feasible. “A typical anti-stacking provision states that the royalty rate payable to the licensor will be reduced if the licensee is obliged to enter into licenses with third parties in relation to the product.”

  • Steve Murchie

    I’d love hear some more on this topic. I agree that the current patent world is fubared, especially concerning software. However, what entrepreneur hasn’t run into the demand for “defensible IP” in the search for funding? It’s refreshing to see VCs saying don’t bother. Please do rant — I’ll make some popcorn.

  • Can you elaborate on why you “think the entire patent world is screwed up beyond belief?”