For twenty years, I thought patents were a waste of money. Expensive lawyers, slow process, dubious enforceability. Ship fast, iterate faster - that was the strategy. Then I watched an acquisition fall apart over IP concerns, and I started filing everything. Here's what changed my mind.
File provisional patents early and cheaply. They establish priority dates while you validate the market. Convert to full patents only for proven value.
The standard startup advice is "don't worry about patents early." Focus on product-market fit. Move fast. You can't afford to spend $15-30K on a patent that might not matter. I've lived both sides of this. This advice is often correct - and occasionally catastrophically wrong. Knowing when it's wrong is worth understanding.
When Patents Don't Matter
For most early-stage startups, patents genuinely don't matter:
Speed is your moat. If you're iterating weekly, patents are too slow. By the time a patent issues (3-5 years), you've pivoted three times. The thing you'd patent no longer exists.
Execution beats ideas. Most startup ideas aren't novel in a patent sense. What's novel is your specific implementation, your market timing, your team. These aren't patentable.
Enforcement is expensive. A patent you can't afford to enforce is a piece of paper. Patent litigation starts at $1-3 million. Early-stage startups can't afford it. Even late-stage startups often can't.
First-mover advantage is short. In software, first-mover advantage lasts 18-24 months. Patents take 3-5 years to issue. By the time you have one, the market has moved on.
Trade secrets may work better. If your advantage is in implementation details - how you train your models, your data pipeline optimizations, your specific algorithms - trade secrets protect these without disclosure. Patents require publication.
For a pre-seed startup burning runway to find product-market fit, spending $20K on a patent application is usually the wrong call. That money buys 2-3 months of engineer time, which probably matters more.
When Patents Suddenly Matter
Then there are the moments when patents matter enormously:
M&A due diligence. I've seen a $40 million acquisition nearly collapse because the target company had no IP protection. The acquirer's lawyers asked "what do we actually own?" The answer was "a codebase anyone could replicate." They renegotiated the price down by 30%. I learned that IP is a key component of any technical due diligence checklist.
Defensive positioning. Large companies sue smaller competitors to slow them down. If you have patents, you have counter-ammunition. Not to win - litigation is never winning - but to make attacking you expensive enough that they reconsider.
Licensing revenue. Some companies (Qualcomm, ARM, Dolby) build entire business models around IP licensing. Even for non-IP-centric companies, patents can become a revenue stream - or a bargaining chip in cross-licensing negotiations.
Investor confidence. Later-stage investors, especially those with enterprise backgrounds, care about IP. As DLA Piper's research shows, "we have 12 patents pending" sounds different than "we have some code." It shouldn't matter this much, but it does.
Competitive barriers in regulated industries. In healthcare, defense, financial services - industries with long sales cycles and compliance requirements - patents provide defensible moats. If it takes 3 years to get FDA approval, a 3-5 year patent timeline is acceptable.
Hardware and deep tech. If you're building physical products or fundamental technology (materials, batteries, chips), patents matter from day one. The timeline for hardware iteration matches patent timelines. The capital requirements mean competitors can't just clone you quickly.
The AI Patent Landscape
AI has made patents simultaneously more important and more problematic:
Concentration is extreme. The top 10 AI patent holders control nearly half of all AI-related patents. IBM, Samsung, Microsoft, Google, Qualcomm - the giants have been filing aggressively for a decade. USPTO research on entrepreneurship and patents confirms this concentration. If you're building AI, you're probably infringing someone's patent.
Patent thickets are real. In some AI domains, it's difficult to build anything without touching existing patents. The strategy becomes: accumulate enough patents that you have something to trade in cross-licensing negotiations.
Patentability is uncertain. Software patents have faced increasing scrutiny since Alice Corp v. CLS Bank (2014). AI patents that look like "do [known thing] with machine learning" get rejected. The claims have to be specific about technical implementation.
Publication timing is strategic. If you're not going to patent something, publishing it creates prior art that prevents others from patenting it. Defensive publication is a real strategy - share your innovations openly to keep the commons open.
The AI patent situation is a mess. The rational response for most AI startups: file enough patents to have a seat at the table, but don't expect them to provide meaningful competitive protection.
Provisional vs. Non-Provisional Strategy
The provisional patent is the founder's friend:
Cost: $1,500-5,000 for a provisional vs. $15,000-30,000 for a full application.
Timeline: You have 12 months from provisional filing to decide whether to file the full application.
Protection: You can use "patent pending" as soon as you file a provisional. This provides some deterrence even before examination.
Strategy: File provisionals early and often. They're cheap enough to file speculatively. After 12 months, you know a lot more about what matters. Convert the important ones, let the rest lapse.
The catch: provisionals must adequately describe the invention. A sloppy provisional that doesn't match the eventual full application loses its priority date. If you're going to file provisionals, do them properly.
What I Actually Do Now
After watching that acquisition nearly fail, I discovered the hard way why my approach needed to change:
File provisionals on anything substantial. New algorithm? File a provisional. Novel system architecture? File a provisional. Unusual data processing pipeline? File a provisional. At $2-3K each, it's cheap insurance.
Review provisionals quarterly. What's still relevant? What's become core to the business? What have competitors started doing? This informs which provisionals to convert.
Budget for IP in fundraising. When raising, explicitly include IP costs in the budget. Investors rarely push back - they want the protection too.
Document invention dates. Keep records of when ideas were first conceived and reduced to practice. This matters for priority disputes and prior art defenses.
Consider trade secrets first. Not everything should be patented. Implementation details that can be kept secret may be better protected as trade secrets. Patents require disclosure.
Work with experienced patent counsel. Not a general business lawyer - a patent attorney who understands your domain. When I was at ZettaZing, the difference in claim quality between general and specialized counsel was dramatic. This matters because weak claims get invalidated.
What I'd Tell Founders Now
The nuanced answer:
Pre-seed through Seed: Probably don't worry about patents. File provisionals if you have something genuinely novel and $2K to spare. Focus on product.
Series A: Start thinking about IP strategy. File provisionals on core technology. Convert anything that matters. Budget $50-100K for IP over the next 18 months.
Series B and beyond: You need a real IP portfolio. Not for enforcement - for negotiation, for M&A optionality, for investor confidence. Budget accordingly.
If you're in hardware, deep tech, or regulated industries: File patents early. Your timeline is long enough that patents make sense. Your capital requirements are high enough that you can budget for it.
If you're building AI: File enough to have a seat at the table. Don't expect patents to be your moat. Your moat is data, talent, and speed.
If you're building pure software: Move fast, document inventions, file provisionals opportunistically. Convert selectively. Focus on execution.
The Bottom Line
My mistake wasn't ignoring patents for 20 years. My mistake was having a blanket policy. "Patents don't matter" was true for most projects, most of the time. But the one time it mattered, it mattered enormously.
The right answer isn't "always file" or "never file." It's understanding when patents matter and acting accordingly. For most startups, most of the time, they don't. But you need to recognize the situations where they do - and avoid letting founder ego drive either over-investment or under-investment in IP protection.
The $40 million acquisition that nearly collapsed? It eventually closed at $28 million after renegotiation. That $12 million haircut could have been avoided with $100K of patent applications over the preceding years. The math is clear in retrospect. The trick is seeing it in advance.
IP Gap Calculator
See what a lack of IP protection could cost you in an M&A scenario.
"A patent you can't afford to enforce is a piece of paper."
Sources
- Intellectual property rights for tech startups — DLA Piper
- Protecting Intellectual Property: What Startups Need To Know — Silicon Valley Bank
- Enterprising Ideas: A Guide to Intellectual Property for Startups — World Intellectual Property Organization guide providing step-by-step IP guidance for startups, covering patents, trade secrets, trademarks, and strategic planning.