Ted M. Sichelman

High Technology Entrepreneurs and the Patent System: Results of the 2008 Berkeley Patent Survey

We offer description and analysis of the 2008 Berkeley Patent Survey, summarizing the responses of 1,332 U.S.-based technology startups in the biotechnology, medical device, IT hardware, software, and Internet sectors. We discover that holding patents is more widespread among technology startups than has been previously reported, but that the patterns and drivers of holding patents are industry and context specific. Surprisingly, startup executives report in general that patents are providing relatively weak incentives for core activities in the innovation process. Our analysis uncovers that the drivers of startup patenting are often associated with capturing competitive advantage, and the associated goals of preventing technology copying, securing financing, and enhancing reputation - although again these and other motives depend on firm and industry factors. We also find substantial differences in the roles played by patents for startups in the biotechnology and medical device sectors - where patents are more commonly used and considered important - as compared to those operating in the software and Internet fields - where they are less useful. Interestingly, venture-backed IT hardware startups tend to resemble those in health-related fields in terms of their use of and motives for patenting. We generally find a wide disparity between the patenting behavior of venture-backed technology startups and those that are not funded with venture capital. We also discover that, when choosing not to patent major innovations, startups often cite to cost considerations, although again the motives to forgo patenting differ according to firm and industry characteristics. The respondents to our survey also generally report that checking the patent literature and licensing patents from others is reasonably common, although there too results differ according to the context. Other findings are discussed.

Why Do Start-Ups Patent

Numerous scholars have proposed many different explanations for why inventors and innovative companies patent. Few scholars, however, have conducted empirical studies seeking to confirm or deny these theories. Furthermore, there are only a handful of studies examining how entrepreneurs and start-up companies use and are affected by the U.S. patent system, and none answers the question presented in our title. We first briefly survey the dominant theories of why innovators file for patents and why they forgo patenting, focusing on how well, if at all, these theories apply to start-up companies. Next, we examine the existing empirical data on the topic and find it generally inconclusive. Last, we describe the 2008 Berkeley Patent Survey, the first survey in the United States examining patents and entrepreneurship, which is currently underway at the direction of the authors and other investigators. In particular, we discuss the survey questions designed to answer why entrepreneurs and start-ups patent (or choose not to do so) and offer some hypotheses based on previous research.

Response to ‘pervasive sequence patents cover the entire human genome’

A response toPervasive sequence patents cover the entire human genome by J Rosenfeld and C Mason. Genome Med 2013, 5:27.See related Correspondence by Rosenfeld and Mason, http://genomemedicine.com/content/5/3/27 and related letter by Rosenfeld and Mason, http://genomemedicine.com/content/6/2/15

Startups & the Patent System: A Narrative

In 2008, a team at the University of California, Berkeley, School of Law conducted the most comprehensive study to date on startup companies and the patent system. The study consisted of a survey, which led to primarily quantitative data, as well as more in-depth pre- and post-survey interviews and case studies. Following upon articles broadly reporting the quantitative survey results, this chapter recounts the qualitative interviews and case studies in order to provide a richer overall account. Like the quantitative results, the qualitative results vary widely depending upon company industry, age, sophistication, and a variety of other factors. As such, this chapter reinforces the study’s original finding that there is no overriding characterization of how startups use and are affected by the patent system.

Why Do Entrepreneurs Patent

A central goal of any economy is to achieve rapid and sustained growth. This cannot happen without continued innovation. This landmark Handbook brings together many of the world’s legal scholars to examine features of the legal infrastructure that affect both innovation and growth. Individual chapters explore different legal subject areas, in most cases offering recommendations for rule changes that could accelerate growth, primarily in the context of the US economy. The introductory chapter provides a framework for these discussions and explains why it is time for legal scholarship and research to move in that direction.

Why Do Startups Use Trade Secrets

Empirical studies of the use of trade secrecy are scant, and those focusing on startups, non-existent. In this paper, we present the first set of data — drawn from the Berkeley Patent Survey — on the use of trade secrets by U.S. startup companies in the software, biotechnology, medical device, and hardware industries. Specifically, we report on the prevalence of trade secrecy usage among startups. Additionally, we assess the importance of trade secrets in relation to other forms of intellectual property protection and barriers to entry, such as patents, copyrights, first-mover advantage, and complementary assets. We segment these results by a variety of factors, including industry, company business model, overall revenue, patenting propensity, funding sources, innovation types, and licensing. From this segmentation, we implement a basic regression model and report on those factors showing a statistically significant relationship in the use of trade secrets by startups. Our results point to three major findings. First, trade secrecy serves other important aims aside from first-mover advantage. Second, trade secrets may act both as economic complements and substitutes to patenting. Third, trade secrets may serve as important strategic assets, functioning much in the same manner as patents in terms of licensing and setting the boundaries of the firm.

Brief of 22 Law, Economics, and Business Professors As Amici Curiae in Support of Respondent in TC Heartland v. Kraft Foods

TC Heartland v. Kraft Foods, currently pending at the U.S Supreme Court, concerns where patent owners can file suit against corporate defendants. This amicus brief considers and analyzes the policy issues at stake in this case. It concludes that the current venue rule, which allows patent owners to sue corporate defendants in any district in which personal jurisdiction lies, should be retained. First, rigorous empirical analysis shows that limiting venue in the manner proposed by the Petitioner in this case would not have any meaningful effect on the existing concentration of patent cases among the lower courts. Instead, it would primarily shift patent cases from one jurisdiction that is relatively favorable to patent owners to two jurisdictions that are relatively less favorable. Second, Congress has effectively rejected concerns over “forum shopping” and “forum selling” in adopting a statutory venue rule that corporate defendants in nearly every type of federal civil case may be sued anywhere personal jurisdiction lies. This rule is sensible, because corporate defendants should be subject to suit where they have committed substantial harmful acts. There is no reliable, systematic evidence to show that “forum shopping” or “forum selling” in patent law is exceptional when compared to other areas of law so as to justify a special venue rule. Third, even if patent suits were exceptional, only Congress is in a position to craft a rule that meaningfully distributes cases among the various district courts and that is equitable to patent owners and accused infringers alike.

An Economic Model of Patent Exhaustion

The doctrine of patent exhaustion implies that the authorized sale of patented goods “exhausts” the patent rights in the goods sold and precludes additional license fees from downstream buyers. Courts have considered absolute exhaustion, in which the patent owner forfeits all rights upon an authorized sale, and presumptive exhaustion, in which the patent owner may opt-out of exhaustion via contract. This paper offers the first economic model of domestic patent exhaustion that incorporates transaction costs in licensing downstream buyers and considers how the shift from absolute to presumptive exhaustion affects social welfare. We show that when transaction costs are high, the patent owner has no incentive to individually license downstream users, and absolute and presumptive exhaustion regimes are equivalent. But when transaction costs are at the intermediate level, the patent owner engages in mixed licensing, individually licensing high-valuation buyers and uniformly licensing low-valuation buyers. Presumptive exhaustion is socially optimal when social benefits from buyer-specific pricing outweigh social costs from transaction cost frictions in individualized licensing, which requires sufficiently low transaction costs.

Intellectual Property and Technology Startups: What Entrepreneurs Tell Us

This chapter provides evidence on how young technology startups are employing intellectual property (IP) protection when innovating and competing in the United States. Although researchers and teachers of university technology transfer often think only in terms of patents and the Bayh-Dole Act, this chapter suggests that adopting a more nuanced view of IP rights is appropriate. After reviewing the primary non-patent types of IP protection available in the U.S. (copyright, trademark, and trade secret), we explain that while patents are often considered the strongest protection, for some entrepreneurs – particularly those operating in the U.S. software and Internet sectors – patents may be the least important means of capturing value from innovation. We present evidence from the 2008 Berkeley Patent Survey to demonstrate that IP is used by U.S. startups in very different ways, and to different effects, across technology sectors and other company-specific characteristics. Contrary to the common assumption in academic discourse, we show that different forms of IP protection often serve as complements, rather than substitutes.

Revisiting Labor Mobility in Innovation Markets

It is now widely asserted that legal regimes that enforce contractual and other limitations on labor mobility deter technological innovation. First, recent empirical studies purport to show relationships between bans on enforcing noncompete agreements, increased employee movement, and increased innovation. We find that these studies misconstrue legal differences across states and otherwise are flawed, incomplete, or limited in applicability. Second, scholars have largely adopted the view that California’s policy against noncompetes promoted Silicon Valley as the world’s leading technology center. By contrast, Massachusetts’ enforcement of noncompetes purportedly stunted innovation in the Route 128 region near Boston. We show that this account is incomplete. During the rise of Silicon Valley, California noncompete law did not as vigorously preclude noncompetes as today and firms could substantially mimic noncompetes through contractual and other instruments. Rather, fundamental technological and economic factors more persuasively account for the rise of Silicon Valley and the Boston area has remained a significant innovation center. There is little compelling ground for the view that barring noncompetes and other limitations on employee mobility promotes innovation.