A recent study on R&D vitality, “Measuring Innovation“ by Michael Cooper et al, reports that only about 50% of companies with R&D operations file patents. Another recent study focusing on patent litigation, “The Layered Patent System“ by Michael Risch, reports that on a percentage basis more patents asserted by non-practicing entities (so-called “patent trolls”) are invented by small entities, and more of such patents are at least partially invalidated in the field of computer architectures, than similar patents asserted by companies that manufacture/sell products.

Taken together, these studies may suggest to some folks that small entities (be they individual inventors or startup companies) should avoid the patent system, particularly if they are in the technical field of computer architectures (and related fields where patents are increasingly invalidated, such as software). But they would be wrong.

First, potential investors are increasingly looking at the patent portfolio of startups as part of their financial due diligence. Investors are more willing to risk funds for startups with patent portfolios that at least partially circumscribe a “zone of exclusion” that prevents competitors from capturing the marketplace value add of the startup. Even if 50% of entities with ongoing R&D don’t participate in the patent system, that simply means a patent portfolio has a greater chance of differentiating a startup from other potential recipients of investment.

Second, at the end of the day patent validity depends primarily on how the invention differs from the prior art and how the application is prepared and prosecuted. That is true for any invention from any entity.

A worthwhile portfolio of patents is made up of individual innovations, some more valuable than others, that provide value as an integrated whole.

It includes patents for which investments are made to create additional embodiments or other offshoots to build a portfolio, and it includes strategies to prepare and prosecute applications with an eye toward building a “zone of exclusion.” Building a portfolio that provides integrated value…as opposed to simply obtaining patents…is the best way to realize a return on patent investment. And that remains true regardless of patent litigation results. Indeed, as reported by Professor Risch, the vast majority of patents asserted in litigation don’t ever get to the point of a court ruling on validity or infringement, because the parties settle. So, while the results of patent litigations are interesting, they are not determinative on the value of an integrated patent portfolio.