Patent war threatens technology start ups

Independent

17 Aug, 2011 05:30 PM2 mins to read

Venture capitalists are warning that the increasing number of patent battles is damaging technology start-ups, with legal cases threatening to drive smaller companies out of business.

The focus has gone on patents with Google's US$12.5 billion ($15 billion) deal to buy Motorola's mobile phone business. Analysts pointed to the strength of Motorola's intellectual property as crucial to the acquisition.

As major companies are investing in protecting themselves as the patent wars heat up, at the other end of the market technology start-ups and their backers fear for the future of companies that cannot fight back in the courts.

Nic Brisbourne, a partner at the venture capital company DFJ Esprit, said litigious patent owners were "holding the industry back. While it is more of a problem in the US, many British start-ups will be affected as they see it as a key market."

"It is really hard for small companies to figure out which patents exist in their field," Brisbourne said. "And many are really broad."

He said for some of the smaller start-ups that "if you don't have a lot of money, you can't play at all".

One start-up founder in the UK said patents were "a big consideration" for the industry, adding they could be "very damaging if you stray into an incumbent's turf".

Mark Kenrick, a partner at the intellectual property lawyers Marks & Clerk, said patents "do become a risk for start-ups".

However, he said small companies could use patents as a tool themselves: "While getting their own patents isn't cheap, they can prove an effective insurance policy to protect themselves against other companies."

Google chief executive Larry Page said this week that Motorola's patents would "enable us to better protect Android from anti-competitive threats".

Royal Bank of Scotland analyst Didier Scemama said that the patents were "the underlying reason" behind the deal.

He added: "The growing rivalry between Apple and Google has led both companies to use legal avenues. Apple is also currently suing HTC and Samsung for patent infringements, for instance. Samsung and HTC are also suing Apple back."