Why Startups Don’t Patent

What can intellectual property (IP) protection do for startups? Are patents worth it? Is there a need to patent when the technology can be kept a trade secret? Whether you’re a startup CEO building up your business or just someone with an idea, it is helpful to think about your intellectual property assets at every stage of business development.

How does IP benefit startups?

Intellectual property protection benefits the startup through protecting the company’s intangible assets. Patents, trademarks, copyright, and trade secrets all play important roles in the successful commercialization of technologies. According to Baran and Zhumabaeva, one of the most valuable assets a company can have is a known and appreciated trademark of a product name or packaging design as a company’s market identity and its ability to generate profit hinge on these elements. Furthermore, the company’s later development depends on its rights to use technology, be it inventions or industrial designs, and this has a significant impact on the perceived value and market standing of the company. 

Aside from protecting their intellectual property from knockoffs, it has been found that startups seek patent protection to improve valuation, enhance reputation, and to secure capital. Startups with patents show higher growth in terms of employment and sales. Patents are seen as a stepping stone in the development of a company, and thus they are seen as an indicator of success for possible acquisition. Other reasons to file patents are to prevent infringement lawsuits and improve negotiating positions in cross-licensing. 

Why don’t startups seek IP protection?

In general, there are three main reasons why startups don’t seek patent protection: 

  1. They underestimate the importance of intellectual property protection; 
  2. They don’t have an integrated intellectual property management strategy for their business; and 
  3. They recognize that patenting can be costly.

Every startup revolves around innovation, asserts Baran and Zhumabaeva. Without intellectual property protection, a startup’s competitor may steal the startup’s ideas, and thus its customers. Therefore, startups must not underestimate the value of protecting their IP. This means being aware of what to protect, how to protect it, and when to protect it. However, not many startups are knowledgeable about IP protection.

Many startups tend to not seek patent protection simply because they are unaware of what it is and how it benefits them. Examining Poland, Baran and Zhumabaeva found that in general, Polish enterprises show very low levels of patent activity in comparison to other countries in Europe. This is mainly attributed to the barriers in cooperation between business and science. When research and development remain in the laboratory and businesses remain focused on profits not growth, patent activity slows. This lack of awareness of the importance of IP causes startups to ignore their IP management strategy. According to the survey, in Poland, 34% of entrepreneurs lack an innovative strategy and do not see one being implemented in the near future. An additional 33% of companies say that their IP management strategy will be developed in the future, while only 18% of companies surveyed actually have an IP management strategy. Mann and Sager have stated that for most startups, the possibility of patenting is low on the list of investment criteria. In general, it has been seen that the decision to patent is routine rather than strategic. 

An IP management strategy depends on the company’s goals, industry, size, and business profile. According to Graham and Sichelman, the type of industry drives the perceived usefulness of patents. Generally, companies that revolve around process innovations rank patenting as relatively unimportant in contrast to product innovation companies. The fields of biotechnology and medical devices tend to prioritize patenting while software and Internet firms tend not to do so. An IP management strategy helps businesses understand which ideas they should protect, what type of protection to seek, and when in their development they should seek protection. 

Lastly, startups tend not to seek IP protection due to the costs associated with its application. In fact, Graham and Sichelman found that 10% of startups surveyed listed cost as the only barrier to filing a patent. The costs are not limited to the actual filing fees of an application alone; these include the designing and implementation of a management strategy for IP protection, the legal services that come with obtaining exclusive rights, the administration fees, the costs of legal disputes both in and out of court. Startups in particular often pay significantly more for a patent than established companies. Startups tend to file patent applications on inventions that are more important to the company’s core business model than those filed by established firms as their financial resources are limited. Additionally, startups typically don’t have in-house counsel in contrast to established firms, and the costs for outside counsel tend to be higher. Moreover, protection only on a national level is lacking, but applying for a broader jurisdiction is an additional cost. 

Apart from that, for companies in Poland there is a lack of a proper financing system. For Polish startups, the most common sources of funding in the initial stage of development are their own resources, European Union grants, and venture capital (VC) funds. Alternative financing sources like business angels are available but in Poland, this market is very poorly developed. In general. VCs invest about six times as much in the US as compared to the EU. The EU also tends to receive far more public funding and much less private investment than the US. Thus, what tends to occur is that startups from the EU raise initial capital more easily, while startups from the US can more readily access later-stage capital. 

Why don’t startups want to seek patent protection?

Startups don’t want to seek patent protection because other forms of IP protection exist. While patents are usually the first thing that comes to mind on the topic of IP, we must develop a more comprehensive view of IP. Non-patent forms of IP are equally important in the commercialization of technology; they protect the innovator through the whole process of commercialization, from idea to the market. 

A common misconception about IP is that different forms of IP protection act as substitutes to one another. This is called the substitution view. In reality, all forms of IP protection work together and complement each other in the dynamic process of innovation and commercialization. For example, trade secrets are often thought to replace patents in protection as once an invention is disclosed, it can no longer be a trade secret. However, products consist of multiple inventions. Some of these inventions may be kept as trade secrets while others may be disclosed and patented, depending on the company’s IP management strategy.

A good case study of different forms of IP working together is seen in the manufacturing company Pilkington Glass. Pilkington innovated the float glass manufacturing process which substantially lowered manufacturing costs. They patented the float glass process and then licensed it out, with the inclusion of a knowledge grant-back provision in their licensing contracts. This provision allows Pilkington to own any innovation made by licensees on their manufacturing process. They closely guarded these process innovations as trade secrets, so when their original patents expired in the 1980s, the company still collected royalties under the licenses based around its perpetual trade secrets. 

Which form of IP protection to choose depends on the technology and your business model. Graham and Sichelman have found that software firms in particular rank copyright highly as a factor in capturing the competitive advantage from the startup’s innovations, with copyright coming second only to first-mover advantage. Because copyright covers software, software firms likely do not rank patenting very highly as a complementary form of IP provides protection. In contrast, non-software startups rate copyright as the least important.


Patents can provide the greatest scope in protection, that is, 20 years. They also prevent copycats, improve reputation and valuation, and make it easier to gain access to capital. However, patents are not the only form of IP protection available. The type of IP protection a business needs depends on multiple considerations. As a startup, one must develop an IP management strategy for the commercialization of current technology and the development of future products. The legal costs associated with fighting against potential infringement should also be taken in consideration when weighing the pros and cons of patenting technology.

If you are in need of help in formulating your IP management strategy, drop us a line at Pinoy IP Works, Inc. We are available for consultations for any IP-related matter.  


Baran, A. and Zhumabaeva, A. (2018).  “Intellectual Property Management in Startups – Problematic Issues.” Engineering Management in Production and Services 10 (2), 66-74. https://doi.org/10.2478/emj-2018-0012.

Graham, S. and Sichelman, T. (2016). “Intellectual Property and Technology Startups: What Entrepreneurs Tell Us.” Technological Innovation: Generating Economic Results (Advances in the Study of Entrepreneurship, Innovation and Economic Growth, Vol. 26), Emerald Group Publishing Limited, Bingley, pp. 163-199. https://doi.org/10.1108/S1048-473620160000026006.

Mann, R., and Sager, T. (2007). “Patents, venture capital, and software start-ups.” Research Policy, 36, 193-208. https://doi.org/10.1016/j.respol.2006.10.002.