Venture-backed startups play a crucial role in innovation and advancing our technology. However, the development of secondary markets for patents and the proliferation of patent assertion entities starting in the early twenty-first century has made the patent ecosystem a difficult environment for startups to navigate. Startups face challenges that their more established counterparts do not. First, startups must rely heavily on external sources of funding and, as a result, many decide to file for patents early in their lifecycle to signal their value to potential investors. Second, patent assertion entities threaten startups with patent infringement suits at a disproportionately high rate, which disrupts startups’ productivity and diverts their limited resources. This Note explores the “vicious patent cycle.” The cycle begins when startups file patents to signal worth. Then, when 90% of these startups fail, they leave behind patents that grow the “patent thicket” as well as opportunities for patent assertion entities to stifle innovation. Together, these negative externalities exacerbate the challenge of building a new company. Unfortunately, the United States patent system is not well suited to put an end to the cycle. Thus, this Note introduces a solution for startups: the small business commercialization patent. The small business commercialization patent is a modified form of the commercialization patent introduced by Ted Sichelman but is tailored to meet the unique needs of venture-backed startups.
STARTUPS AND INVESTORS AND TROLLS, OH MY!: HOW COMMERCIALIZATION PATENTS CAN BENEFIT STARTUP INNOVATION,
Nw. J. Tech. & Intell. Prop.