Google's Nest Acquisition Has Much To Do With Patents


The news of Google’s acquisition of Nest Labs for $3.2 billion cast a spotlight on an ongoing debate in startups: Should they bother to seek patents to protect their inventions or not?

In certain industries — biotechnology, biomedical devices, renewable fuels and pharmaceuticals — patents are an absolute must to survive. In other areas such as software and business methods, the answer is not always as clear. Some argue that patents in these areas have little value, due in part to backlogs at the patent office.

Many times, you are looking at three years or more to get a patent issued. When you add on the expense of applying for patents and having an employee focused on patents rather than building a product and marketing it, it becomes even more hazy. But the story of Nest Labs, a digital thermostat company, provides compelling arguments in favor of patent acquisition.

The Google purchase happened, in part, because of the company’s extensive patent portfolio. It has been reported that Nest has been granted 40 patents, has filed for an additional 200 and also has licensed many more. It has been speculated that Google would not have purchased Nest if not for the patents. Google, a company historically weak on patents, has been beefing up its patent holdings through acquisitions of companies with extensive patent rights.

While it is likely unrealistic for most startups to pursue so many patents — Nest had the advantage of being founded by two ex-Apple employees and later hiring Apple’s former chief patent counsel — start­ups should carefully consider whether filing patent applications make sense.This determination is specific to each startup; the decision may turn on whether patents keep out potential competitors, attract a big-name buyer or are preferred by external investment sources like venture capitalists or angel investors.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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