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International Business Machines Corp
Software startups have traditionally avoided patenting their innovations, viewing it as an unneeded expense that can eat up $15,000 or so. “We thought about it, because there’s definitely some patentable stuff,” says Brett Martin, the chief executive officer of New York’s Sonar, which makes an app that helps people connect with strangers. “But we’re busy trying to build a business.”
Yet many who aspire to build the next Facebook are learning from the mistakes of their guru, Mark Zuckerberg. His company was unprepared for the battle that erupted when Yahoo! (YHOO) sued in March for infringing 10 patents. Soon after, Facebook purchased 750 patents from IBM (IBM) and spent an additional half-billion dollars on part of the AOL (AOL) patent portfolio recently bought by Microsoft (MSFT). Meanwhile, Apple (AAPL), Google (GOOG), Oracle (ORCL), and other tech giants are locked in patent lawsuits.
Which is why more entrepreneurs are thinking like Oliver Cameron. His new iPhone app, Everyme, is a social network similar to Facebook. Behind the scenes, though, algorithms perform some fancy operations, such as grouping a user’s friends on other networks according to criteria such as geography or workplace. Before the app’s launch in April, Cameron, the CEO of the Menlo Park (Calif.) startup, made sure to file his patent paperwork. “We’re not really patent whores,” he says. “We’re just proud of what we’ve built.”
“The Valley in general seems to be getting more litigious,” says Travis Katz, a former Myspace executive who co-founded travel startup Gogobot. “Big companies can sue small companies out of existence, even with a baseless claim.” Katz has had his lawyers begin reviewing Gogobot technologies that could be patented. Path, a mobile social network started two years ago, has filed for 13 patents. Karma, which makes a gift-buying app, has filed for three patents covering technologies related to commerce, notifications, and social networking.
Chris Tolles, an investor and the CEO at local news site Topix, says startups should invest in patents before pool tables and Aeron chairs—the typical accoutrements of hip young companies. “I wouldn’t do it Day One. But you’re a year in, you have some funding, then yeah, get some patents,” he says. The patent process can take as long as five years, according to Mark Radcliffe, a partner at law firm DLA Piper.
While small tech companies are learning to play the patent game, at least one larger one is trying to change the rules altogether. On April 17, Twitter announced all its patents will be governed by its Innovator’s Patent Agreement. Under it, the person whose name is on a patent—usually an engineer or scientist—retains control over how the patent is used, even if the patent is sold to another company. Patent owners must ask the innovator’s permission before suing over the patent, although there are exceptions for companies that use patents defensively.
Everyme’s Cameron and his co-founder Vibhu Norby want to support the IPA. Their first three apps were already with the U.S. Patent and Trademark Office by the time IPA was available, though, and they don’t plan to refile them. “There are bigger things to worry about,” says Cameron. “Like launching,” says Norby.
The bottom line: While startups get serious about intellectual-property law, Twitter pioneers a type of patent friendly to engineers.