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Study Confirms Benefits of Patents for Start-Ups

A recent study published by the USPTO’s Office of Chief Economist, as part of its Economic Working Paper Series, examined whether patents helped start-up companies grow and succeed.

The Bright Side of Patents by Joan Farre-Mensa (Harvard Business School), Deepak Hegde (Stern School of Business, New York University), and Alexander Ljungqvist (Stern School of Business and NBER) (Working Paper No. 2015- 5, January 2016) used detailed micro data on all patent applications filed by start-ups at the USPTO since 2001 and approved or rejected before 2014.

The researchers found that patent approvals for start-ups “have a substantial and long-lasting impact” because they helped companies to create jobs, grow sales, continue to innovate and attract investors. Conversely, delays in the patent examination process significantly reduce these benefits, even when the patent application is eventually approved.

The study results suggest that patents are catalysts for start-up growth because they open the door to capital, which is absolutely essential to start-up success. The study’s authors emphasize that these patent benefits should be considered when patent “reform” is being proposed. As the authors note: “Reforms of the patent system that do not take this role of patents into account run the risk of negatively impacting the availability of capital for innovative startups.”

To read The Bright Side of Patents, go to http://www.uspto.gov/sites/default/files/documents/Patents%20030216%20USPTO%20Cover.pdf.