Do not feed the trolls

Don't feed the trolls: VCs, startups won't sell patents to them

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Patent troll activity is having a serious impact on startups, according to a new study from Robin Feldman of UC hastings School of Law.

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Cromwell Schubarth

Senior Technology Reporter- Silicon Valley Business Journal

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Venture investors avoid patent trolls like the plague, even when it might cost them money, according to a new study.

"Every single VC we talked to said that an existing patent demand could be a major deterrent to their investing in a startup," said Robin Feldman, a University of California, Hastings, law professor who did the study for the National Venture Capital Association.

Investors have little interest in giving patent trolls ammunition, either, Feldman told me in an interview Tuesday morning.
"Almost two-thirds said they wouldn't consider selling intellectual property to patent assertion entities," Feldman said, using the name scholars have for trolls.
That runs counter to some arguments made in Washington, D.C., that say trolls actually help innovation by providing a revenue option when a startup fails.
"Most startups and VCs in our study say they have no interest in selling their patents to patent assertion entities," Feldman said.
About three-quarters of VCs and 58 percent of startups said that patent demands had a significant impact on a company.

The cost of defending against a patent demand can cost a startup from $50,000 to several million, according to Feldman's study and another last month from Colleen Chien, a Santa Clara University associate law professor.

Most of the demands are coming from companies that are mainly in the business of litigating patents, not using them, the studies say. That's what 59 percent of venture capitalists and 66 percent of startup CEOs told Feldman.
The startup sector targeted most by patent trolls is information technology, accounting for 70 percent of the activity cited by VCs in Feldman's study. Life sciences was second with 30 percent and cleantech was mentioned by 10 percent.

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Cromwell Schubarth is the Senior Technology Reporter at the Business Journal. His phone number is 408.299.1823.

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