Great stories about patents and other IP

Start-ups that file for patents are 35 times more likely to be successful than those which don’t, new research reveals

Source: iam-media, by: Richard Lloyd

ip-startup-success-patents-1284-850Another piece of research has highlighted the value that start-ups receive from patent filings. The paper, “A new view of the skew: A quantitative assessment of the quality of American entrepreneurship”, is from four academics at the Massachusetts Institute of Technology. It follows the publication last month of a piece of research titled “The bright side of patents”, that anlaysed the considerable benefits that start-ups receive from filing patents.

In contrast to that paper, this latest piece of research is not solely about the benefits that nascent businesses receive from patent protection. Instead it is a broader analysis of the state of entrepreneurship in the US and the factors that make businesses successful.

Among those keys to success the paper finds that “the likelihood of growth is five times higher for firms with trademarks and 35 times higher for firms that apply for patents”. If a business applies for both patents and registers in the US state of Delaware, the most popular state for companies to domicile in, then its probability of growth is boosted by 196 times.

Despite those remarkable numbers, the paper is not saying that if a start-up receives a patent it is suddenly guaranteed success. Here’s how it describes the relationship between the two:

It is very important to emphasise that these start-up characteristics are not the causal drivers of growth, but instead are “digital signatures” that allow us to distinguish firms in terms of their entrepreneurial quality. Registering in Delaware or filing for a patent will not guarantee a growth outcome for a new business, but the firms that historically have engaged in those activities have been associated with skewed growth outcomes.

More than anything it is perhaps a reflection of the state of patent rights in the US, that research highlighting the beneficial effects of filing for patents on small businesses warrants coverage. More and more attention in recent years has been paid to the perceived threats that patents can pose to small businesses when they are accused of infringing other businesses’ IP. Of course, even in that scenario rights ownership has its advantages as a patent provides a valuable defence against market rivals.

Giving a business freedom to operate remains arguably the overriding reason to file for a patent regardless of a company’s size. It shouldn’t take academic research to tell the market that.

The MIT paper concludes with some points on the conditions for start-ups in the US. “While the supply of new high-potential-growth startups appears to be growing the ability of US high-growth-high potential startups to commercialise and scale seems to be facing stagnation,” the authors write. “Policy interventions to enhance the process of scale-up may be more impactful than those that simply aim to increase shots on goal.” Given the findings of this paper and “The bright side of patents” study, it would seem more imperative than ever that patent policymakers are involved in any conversations on improving the market conditions for start-ups.

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