Why Patents Should Be Part Of Every Startup’s Risk Mitigation Strategy

Russell W. Binns, Jr.  Russell is CEO of AST (Allied Security Trust), a member-based patent holding company

Founders who want to start a company face daunting odds. There are a lot of statistics, but the consensus is that 90% of startups fail within three to five years. See e.g. Ron Berman, et al., Startup Genome Report (March 2012). With odds like these, young companies need to do everything they can to mitigate risks they face in their early days. Most start-ups tend to spend nearly all their time thinking about how to make a great product and get people to buy it. That makes complete sense, but in my experience too many start-ups overlook the need to protect their intellectual property — a costly and sometimes even fatal mistake. Startups sometimes refrain from pursuing patents and other intellectual property due to limited funds. Despite the costs, however, there’s a strong case that start-up companies and their legal counsels need to incorporate intellectual property into their risk mitigation strategy early on to avoid problems as they grow. Besides being able to monetize patents, they can potentially block others from negatively impacting your business, and investors often see patents as a valuable property right.

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