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Patents Losing Popularity Among Tech Start-Ups

It used to be that most tech companies had to file patents to stay competitive. Not anymore.
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In the wake of Facebook’s jaw-dropping $550 million cash purchase of patent portfolios, RJ Metrics Founder Robert J. Moore and patent lawyer Leonid Kravets teamed up to see just how many tech start-ups bother to apply for patents anymore.

The answer? Not many.

Pulling start-up information from Techcrunch's CrunchBase, the two matched the companies with the records in the patent application database published by the United States Patent and Trademark Office. The results showed that of those technology start-ups that did apply for patents, many did not do so early on and even fewer have done so recently, according to a TechCrunch report.

Only about one third of the 12,404 funded technology companies on CrunchBase have applied for patents. Of these, the “hard tech” companies reign supreme. This could be, Kravets says, due to the higher capital requirements required to get started in the semiconductor, hardware, and biotech industries. The “soft tech,” companies were the least likely to apply for patents: E-commerce companies, for example, showed a patent application rate of about 10%.

Historically, the data shows an overall dip in patent application practices. All companies founded between 2005 and 2009, on average, had applied for two patents or more, while companies founded in 2010 averaged one patent or less.

Kravets writes that the decision to file a patent is heavily influenced by both the company's area of technology and, increasingly, its investors. Check out TechCrunch's report for a look at which investors tend to favor companies with patents and which ones stay away from them.

IMAGE: Shutterstock
Last updated: Jun 22, 2012




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