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Small Businesses Are Ditching Patents in Droves
 

Is the costly--and long--patent approval process worth it? Small businesses don't seem to think so.

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Just two months after several provisions of the America Invents Act (AIA) went into effect, the House Committee on Small Business met to evaluate how it's been doing. 

As fewer small businesses seek patents for services, it's beginning to look like the act might have offered too little, too late. 

Some explanations for this trend include the backlog of applications awaiting approval, the cost of securing a patent before and after approval, and the increasing number of patent trolls and ensuing legal battles. To wit, the percentage of small business-secured patents has dropped from 30 percent in 2000 to 20 percent in 2013.

The news is troubling, said committee chairman Representative Sam Graves.  "In the patent arena, small firms play a critical role in developing innovation, producing 16 more patents per employee than big businesses. Moreover, obtaining a patent is equally critical for small businesses and their ability to attract startup capital, and grow their business."

Patents also give small businesses a "powerful foothold" when they "may not yet be able to fully realize the market potential of their product or service," said Dennis Crouch, a law professor at the University of Missouri. 

However, those patents come at a price. 

It can take more than three years for a patent application to work its way through the system, and while businesses can bypass it with a $4,000 fee, small businesses must pony up $2,000--not exactly small change when you're just starting out. 

The other problem is, patents expire, which means paying more fees to keep them up-to-date. Renewal fees tend to be relatively inexpensive, but many small business are ditching them anyway. 

The past decade has also seen a rise in patent licensing companies, also known as patent trolls, which exist for the sole purpose of gathering patents and licensing them. While they've revitalized the marketplace and provided an incentive to actually make patented products, they've also led to an increase in patent infringement lawsuits.

Because they're so expensive, "many cases settle in an unsatisfying way with the accused infringer paying a settlement fee simply in order to avoid the high cost of fully defending the lawsuit," Crouch said. 

What do you think--should small businesses still secure patents? 

IMAGE: Shutterstock
Last updated: May 16, 2013

JANA KASPERKEVIC is a graduate of Baruch College, City University of New York, where she earned a bachelors degree in Journalism and Political Science. She covers start-ups, small businesses, and entrepreneurship for Inc. Her work has appeared in The Village Voice, InvestmentNews, Business Insider, and Houston Chronicle, among others. She lives in Brooklyn.
@kasperka




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